Reminded by a tweet that NNT frequently updates his notebook page.

A wealth tax meaning to punish the wealth generator is absurd: since the payoff is severely clipped on the upside, it would be a lunacy to be a risk taker with small probability bets, with wins of 20 (after tax) rather than 100, then disburse all savings progressively in wealth tax. The optimal strategy is to go become an academic or a French-style civil servant, the anti-wealth generators. To see the cross-sectional problem temporally: Compare someone with lumpy payoffs say an entrepreneur who makes $4.5 million every 20 years to a professor like Krugman who earns the same total over the period ($225K in taxpayer-funded income). The entrepreneur over the VERY SAME income ends up paying 75% in taxes, plus wealth tax on the rest while the rent-seeking tenured academic who doesn’t contribute to wealth formation pays, say 30%.)

The problem with economists is that they are not (with very few exceptions) familiar with fat tails and make general statements that violate the true probabilistic payoff. In Mediocristan changes over time are the result of the collective contributions of the center, the middle. In Extremistan these changes come from the tails. Sorry, if you don’t like it but that is purely mathematical

via Opacity.