Monday, September 26, 2011

Malcolm Gladwell - The Nets and NBA Economics

Malcolm Gladwell had what was a very interesting look at the history behind the Nets move to Brooklyn - a move which Gladwell explains was in essence was a real estate land grab.

Gladwell had me until he brought up marginal tax rates late in the article. Gladwell writes, "Up until the 1960's, the gap between rich and poor in the United States was relatively narrow." I'd argue that Gladwell must not have ever been to Newport, RI or studied the Gilded Age in any history classes he ever took.

He continued, "In fact, in that era [the 1960's] marginal tax rates in the highest bracket were in excess of 90 percent. For every dollar you made above $250,000, you gave the government 90 cents." As you can see from this chart the top rate was 91% in 1960 but by 1970 that top rate was reduced to 71.75%. I hate to nitpick but when the facts start to be squishy like this it makes me start to question the other facts presented.

"Today - with good reason - we regard tax rates that high as punitive and economically self defeating." Well duh!

"It is worth noting, though, that in the social and political commentary of the 1950s and 1960s there is scant evidence of wealthy people complaining about their situation. They paid their taxes and went about their business." The wealthy people didn't complain about their situation? So I guess that top rate just magically reduced itself from 91% in 1960 to 71.75% in 1970 without nary a rich guy making a single complaint to legislators or lobbyists. How can a smart guy like Gladwell be this historically naive?

"The rich have gone from being grateful for what they have to pushing for everything they can get." Sounds like Gladwell longs for the days of John Rockerfeller who got his start war profiteering in the Civil War before systematically crushing all competition to his Standard Oil or maybe pushovers like JP Morgan. The article went from interesting to naive to silly in just one big paragraph of historical ignorance.

Which was too bad because it really did start off as an interesting article on the Nets move to Brooklyn.

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