Worst book ever: "Economics in One Lesson"?

[myrkul]

A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy. 

Oh, on this I agree. But I fail to see how stealing from productive people to help pay the unproductive people to stay unproductive accomplishes this goal.

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[NghtRppr]

Unemployment insurance I'm sure exists for vastly different reasons in your opinion than mine.

I'm not talking about unemployment insurance which doesn't last forever. The point is, if eventually the option is to not work and get nothing or work and get very little then some people might prefer to work and get very little rather than to do nothing and get nothing. Who are you to enforce your personal opinions on them?

[niemivh]

A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy. 

Oh, on this I agree. But I fail to see how stealing from productive people to help pay the unproductive people to stay unproductive accomplishes this goal.

Fallacy #1: That all the money for this program is coming from 'stealing from productive people'. 
Reality #1: The money collected for Employment Insurance Programs (EIPs) comes from a variety of places, some of which is from taxation of various flavors and of a tax actually paid by the person employed.  So effectively it's a subsidized insurance program into which the person receiving assistance had paid into.  To say that it is money 'from Peter to Paul' (if you like that often-used glib) is false.

Fallacy #2: That we 'helping pay the unproductive people to stay unproductive'.
Reality #2: So you see 0 problem of massive levels of underemployment?  You've dodged that question and instead repeated your simplistic talking point.  That you could have (and do) people of very high skill working jobs far people their capacity due to this Great Recession or even just standard economic displacement?  That it's worse to help that person along to find similar level of productive capacity than to have them work at McDonalds?

Fallacy #3:  That being 'productive' is completely self-deterministic.
Reality #3:  Sorry, don't want to be a "collectivist" here and I'm aware that your rugged individuality is probably so great that you can not only pull yourself up by your boot-straps but pull them so hard that you take off into flight like a squatting version of Superman --- BUT, the reality is that we live in a society of complex specialization and cooperative enterprise with very complex systems over-layed one over the other; point 'being productive' is not a purely subjective, self-determined action.  There are many that would like to work in our existing economy yet there is no jobs for them and no demand for them to start their own business.  How is this explained by the world view that you expose of a simple "producers" and "leeches" paradigm?

Fallacy #4:  That taxation is "stealing"
Reality #4:  This is so juvenile a view that I perhaps will have to write a whole thread on it.

[niemivh]

Unemployment insurance I'm sure exists for vastly different reasons in your opinion than mine.

I'm not talking about unemployment insurance which doesn't last forever. The point is, if eventually the option is to not work and get nothing or work and get very little then some people might prefer to work and get very little rather than to do nothing and get nothing. Who are you to enforce your personal opinions on them?

Who are you to enforce destitution, under-employment and starvation on them?

You are basing your argument on the false belief that your view of the market is somehow pure or that the lack of a unemployment program is 'the market in its natural state' as opposed to my view which I'm sure you view as 'meddling' with the market which is tantamount to mortals trespassing in the affairs of gods.

The fallacy that you aren't seeing is that the entire construct of "The Market" to which you want to kneel and pray to is an artificial construction.  It is a legal fiction.  It is defined by a set of legal parameters and political decisions, it always has been, it always will be.

The quicker way to get to the bottom of this, since this is where your irrationality is stemming from, is for you to provide just 1 example of a "Free Market" in the world that has ever existed or does presently exists and to WHY you think it is a "Free Market".  Shortly thereafter we'll all be able to see that no such thing has ever existed nor is such a thing even definable.  It is like asking different people what the word "God" means to them, all they can offer is some illusory vague nondescript euphonic pleasantries rather than any constructed system exists or can exist.

[NghtRppr]

Who are you to enforce destitution, under-employment and starvation on them?

So if I have food and I don't give you any, I'm enforcing starvation on you?

The rest of your post is being ignored because it's based on a bunch of false assumptions. You don't know me so don't pretend to know why I favor markets.

[myrkul]

A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy. 

Oh, on this I agree. But I fail to see how stealing from productive people to help pay the unproductive people to stay unproductive accomplishes this goal.

Fallacy #1: That all the money for this program is coming from 'stealing from productive people'. 
Reality #1: The money collected for Employment Insurance Programs (EIPs) comes from a variety of places, some of which is from taxation of various flavors and of a tax actually paid by the person employed.  So effectively it's a subsidized insurance program into which the person receiving assistance had paid into.  To say that it is money 'from Peter to Paul' (if you like that often-used glib) is false.

Fallacy #2: That we 'helping pay the unproductive people to stay unproductive'.
Reality #2: So you see 0 problem of massive levels of underemployment?  You've dodged that question and instead repeated your simplistic talking point.  That you could have (and do) people of very high skill working jobs far people their capacity due to this Great Recession or even just standard economic displacement?  That it's worse to help that person along to find similar level of productive capacity than to have them work at McDonalds?

Fallacy #3:  That being 'productive' is completely self-deterministic.
Reality #3:  Sorry, don't want to be a "collectivist" here and I'm aware that your rugged individuality is probably so great that you can not only pull yourself up by your boot-straps but pull them so hard that you take off into flight like a squatting version of Superman --- BUT, the reality is that we live in a society of complex specialization and cooperative enterprise with very complex systems over-layed one over the other; point 'being productive' is not a purely subjective, self-determined action.  There are many that would like to work in our existing economy yet there is no jobs for them and no demand for them to start their own business.  How is this explained by the world view that you expose of a simple "producers" and "leeches" paradigm?

Fallacy #4:  That taxation is "stealing"
Reality #4:  This is so juvenile a view that I perhaps will have to write a whole thread on it.

1: I never said ALL the money was from tax. Thus the 'helping'
2: You seem to miss the underlying reasons WHY I have a degree in electronics and worked at Mcdonalds. (Yes, I, too suffered from the dreaded underemployment)
3: "Productive" = working. "Unproductive" = walking out to the mailbox for the monthly check.
4: Oh, please do. I shall greatly enjoy destroying your arguments.

[niemivh]

A healthy workforce that is employed at their maximum level of capacity is what adds more long term value to the economy.  

Oh, on this I agree. But I fail to see how stealing from productive people to help pay the unproductive people to stay unproductive accomplishes this goal.

Fallacy #1: That all the money for this program is coming from 'stealing from productive people'.  
Reality #1: The money collected for Employment Insurance Programs (EIPs) comes from a variety of places, some of which is from taxation of various flavors and of a tax actually paid by the person employed.  So effectively it's a subsidized insurance program into which the person receiving assistance had paid into.  To say that it is money 'from Peter to Paul' (if you like that often-used glib) is false.

Fallacy #2: That we 'helping pay the unproductive people to stay unproductive'.
Reality #2: So you see 0 problem of massive levels of underemployment?  You've dodged that question and instead repeated your simplistic talking point.  That you could have (and do) people of very high skill working jobs far people their capacity due to this Great Recession or even just standard economic displacement?  That it's worse to help that person along to find similar level of productive capacity than to have them work at McDonalds?

Fallacy #3:  That being 'productive' is completely self-deterministic.
Reality #3:  Sorry, don't want to be a "collectivist" here and I'm aware that your rugged individuality is probably so great that you can not only pull yourself up by your boot-straps but pull them so hard that you take off into flight like a squatting version of Superman --- BUT, the reality is that we live in a society of complex specialization and cooperative enterprise with very complex systems over-layed one over the other; point 'being productive' is not a purely subjective, self-determined action.  There are many that would like to work in our existing economy yet there is no jobs for them and no demand for them to start their own business.  How is this explained by the world view that you expose of a simple "producers" and "leeches" paradigm?

Fallacy #4:  That taxation is "stealing"
Reality #4:  This is so juvenile a view that I perhaps will have to write a whole thread on it.

1: I never said ALL the money was from tax. Thus the 'helping'
2: You seem to miss the underlying reasons WHY I have a degree in electronics and worked at Mcdonalds. (Yes, I, too suffered from the dreaded underemployment)
3: "Productive" = working. "Unproductive" = walking out to the mailbox for the monthly check.
4: Oh, please do. I shall greatly enjoy destroying your arguments.

You have yet to rebuff any thing that I posed, you're just repeating your simplistic nonsense.

You apparently don't admit that underemployment exists, but what you are alluding to in your 'rebuttal' is so vague i could interpret it in many ways.  Please write complete thoughts rather than fortune-cookie length blurbs that supposedly "destroy" me.

That goes for what you determine as productive and not.  Is everyone 'working' productive?  By your definition yes but I would argue otherwise.  Is everyone 'not working' not productive?

As patriotism is the last refuge of the scoundrel, brevity must be the first refuge of the ignoramus.  

Prove me wrong.

 

[niemivh]

Who are you to enforce destitution, under-employment and starvation on them?

So if I have food and I don't give you any, I'm enforcing starvation on you?

The rest of your post is being ignored because it's based on a bunch of false assumptions. You don't know me so don't pretend to know why I favor markets.

Then please tell me "why you favor markets".

I'm listening.

[niemivh]

With all due respect, I think you are very misguided on economics if you can't see the quality of Hazlitt's book. He manages to demonstrate in simple form, the most common economic fallacies that people believe in.

The book demonstrates how the problem of theories promoting economic interventionism is always one of not seeing beyond what is seen to what is unseen.

The naked class warfare of this book was so blatant

There is absolutely no promotion of class warfare in the book. It's a refutation of the class warfare that Marxism preaches.

Maybe just to get a litmus test here, do you believe that there is class warfare being waged from the side of the rich and super-rich against the rest of us?  Or that they are all like Ayn Rand wrote about and are all Howard Roark and Hank Rearden like figures?

[niemivh]

But to be fair, it is nowhere as bad as "Capitalism and Freedom" by Milton Friedman.

 


This information doesn't surprise me at all.  It just goes to show how willing people are to gobble up anything, no matter how far-fetched, illogical, ridiculous, or just flat out wrong, if it confirms their worldview.  Fox News has made a fortune operating on this principle.

I'm very interested in hearing criticism of Milton's book, if either of you wish to post a link, or simply point out any bad arguments or evidence. He strikes me as so logical that an illogical leap pointed out would change my opinion of him quite dramatically (assuming he refused to correct it).

Logic and reason are only marginally useful without facts.  You can't sit in a darkened room and rationalize how the natural world works and in the same mode you can't determine how economics work without actual evidence.  Milton and Hazlitt's books that I've read (and Hayek, to a lesser degree) follow the model of a person doing though-experiments to determine how the world actually is.  They don't seek out how it actually works it is just sophistry weaving a tale of A causes B causes C causes the collapse of society.  Many of the slippery slope and doomsday scenarios they setup are completely unobserved phenomenon.  As in, they have never observably happened in the ways or for the reasons that the author professes.

I'll write a longer thread on Milton Friedman's book later, but the paperback version that I bought had no bibliography at all!  Think of writing a research paper without any citations of facts.  Definitely fits the bill of a man writing in a world detached from the realm of facts or reality.

[niemivh]

The book can be found as free pdf at http://www.hacer.org/pdf/Hazlitt00.pdf

I'm looking forward to reading it as it is often used as reference for arguments I find unfounded. So either I'm going learn new stuff on economics or new straw mans on economics, in both cases it should be worthwhile reading.

I don't think this is the same book OP read. It can't be. Granted, I'm only about a third of the way through (finally decided to read it, so I could participate in this thread), But so far I haven't seen any "naked class warfare" or "polemical mouth-frothing vitriol". Maybe he accidentally picked up a copy of "Property is Theft"?

Is it your position that if the monied interests in the world wanted to influence the study of the system of production and political economy to which money is a primary focus (economics) then they would do it in completely open language and forthright bravado?

[niemivh]

If anything, I'm getting sick of his furious backpedaling at the end of every chapter. "Now, don't get me wrong, I'm not trying to say we don't need ANY tax/tarrifs/etc"

 

It's hard to convince a populace to economically slit their own throat in one little book like this.  It's more like boiling a frog, just a little bit at a time.

Look how far closer to the dream-world painted by Milton and Hazlitt in the past many decades from where we were when they wrote their books.  Are we better off as a people?  As a country?  Individually?

[myrkul]

You have yet to rebuff any thing that I posed to you just repeating your simplistic nonsense.

You apparently don't admit that underemployment exists, but what you are alluding to in your 'rebuttal' is so vague i could interpret it in many ways.  Please write complete thoughts rather than fortune-cookie length blurbs that supposedly "destroy" me.

That goes for what you determine as productive and not.  Is everyone 'working' productive?  By your definition yes but I would argue otherwise.  Is everyone 'not working' not productive?

As patriotism is the last refuge of the scoundrel, brevity must be the first refuge of the ignoramus. 

Prove me wrong.

 

Oh no, I freely admit underemployment exists... a careful reading will show you that I even admit to suffering from it. I think, however, that we disagree on the cause.

As for the working/not working productive/not productive: Trading hours for money - at any rate - to an employer or customer is being productive. You are providing them with a service, or they would not be paying you. Doing nothing - and getting paid for it - is not being productive, it is leaching off those who are.

[niemivh]

If you show a single quote where they misrepresent someone, or ignore obvious evidence, or commit a logical fallacy, then that's enough for me not to trust the rest of the Author's conclusions, a reason I dismissed both Rothbard and Rand for example. So you can make a very strong argument against the book by just focusing on a particular part which annoyed you.

I have one argument that I believe seriously hampers the main arguments in the book:

The author seems oblivious of consumption function (and improved models with similar content), which was first introduced by Keynes in his The General Theory at 1936. Simplified model of consumption function is shown here:

The x-axis is the persons income and f(x), the black line, is his consumption. The vertical difference x - f(x) is what person's accumulates. The point where the black and red line intersect is the so called brake-even point. Above that person accumulates money and below either spends his savings or has to take debt. The consuption function is in reality not linear but the slope is reduced when the income increases.

Important concept here is MPC, or marginal propensity to consume. If we give a person extra money, the ratio of it that will increase consumption is the so called MPC. The MPC is simply the slope of the consumption function. In the simplified model all income-classes would have same MPC. In reality, however, average poor people have higher MPC than average rich, as the slope is reduced with x. This leads us to very important conclusion: aggregate demand is not indifferent to transfer of wealth.

Many of the Hazlitts arguments are of form: When you take x from person A (by taxation, accident or other means) and give it for entity B to consume, the loss of consumption of A cancels the positive effects of consumption of B, and as consumption of B is inherently less effective as not being decided by the markets, the net effect is negative. This completely ignores MPC. Consider for example employing somebody with taxation. Somebody loses money in the process. If he has lower MPC than the one employed then aggregate demand will increase thus improving the employment rate in aggregate. In addition, if the job filled is improving circumstances for business (law-enforcement, infrastructure...) it is in effect investment improving prospects for economy. Also, the taxed money is used to increase domestic employment rather than foreign.

This argument does not clearly refute any of the arguments, but clearly shows the book is using straw-mans. There were few other smaller ones, but I'll post them maybe later to keep things bite-size.

The type of strawmen employed by Hazlitt are of the lowest order and so easily refutable for those of us that have the capacity to critically think.

Thanks for the post.

[niemivh]

Thanks Mittlyle for some meaty critique. I'll take a stab...

The author seems oblivious of consumption function (and improved models with similar content), which was first introduced by Keynes in his The General Theory at 1936.

And Keynes was likewise oblivious to economists he preceded. Such as the life cycle hypothesis or Friedman's permanent income hypothesis stating that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term income expectations. Transitory, short-term changes in income have little effect on consumer spending behavior. Consumption trends follow income, whether up or down.

Keynes rightly argues that the rich consume less personally than the poor. But the rich invest. Hazlitts argues that the investor is better equipped to evaluate efficient use of his own savings, both risk and gains, whereas the government through taxation takes from properly risk/gain calibrated investment to necessarily less efficient projects.

You can argue that some projects (law-enforcement, infrastructure...) have a benefit to all of society for which no single investor would see gains that compensate his risk. I don't recall Hazlitt denying this (I believe an earlier post referred to it as 'back peddling') but argued against subverting private investment to fund private debtors who could not otherwise receive favorable loans - ie subsidizing bad investment at the loss of good investment.

As science is now the main driver of the economy I disagree that 'the rich' as a block are better able to invest their money for the best societal returns.  The 'market' is a very poor allocator of capital to research programs, I'm not sure if there is anyone here that has drank so much Free Market Kool-Aid that they think otherwise but if so please explain why by typing it on your computer over the Internet so I can read it, even though the PC and the Internet are both examples of technology that wouldn't have existed without government research programs.

We know where the rich invest their money, where the highest monetary reward will be with the least risk.  Observably we've seen the rich take their money to Wall St hedge funds which turn around and speculate and use it for High Frequency Trading among other non-productive parasitical enterprises.

[niemivh]

You have yet to rebuff any thing that I posed to you just repeating your simplistic nonsense.

You apparently don't admit that underemployment exists, but what you are alluding to in your 'rebuttal' is so vague i could interpret it in many ways.  Please write complete thoughts rather than fortune-cookie length blurbs that supposedly "destroy" me.

That goes for what you determine as productive and not.  Is everyone 'working' productive?  By your definition yes but I would argue otherwise.  Is everyone 'not working' not productive?

As patriotism is the last refuge of the scoundrel, brevity must be the first refuge of the ignoramus. 

Prove me wrong.

 

Oh no, I freely admit underemployment exists... a careful reading will show you that I even admit to suffering from it. I think, however, that we disagree on the cause.

As for the working/not working productive/not productive: Trading hours for money - at any rate - to an employer or customer is being productive. You are providing them with a service, or they would not be paying you. Doing nothing - and getting paid for it - is not being productive, it is leaching off those who are.

We probably disagree on a lot less than you might think.  I am no liberal nor conservative, not left or right, both parties are ideologically bankrupt: the right are raving monetarist lunatics and the left are a pile of kittens with ecological fanatic beliefs and feel guilty for being human.  Both parties fall on a spectrum of how much corporate whoring they do, we truly have 1 party in varying degrees.

I'd like you to reconsider what you consider productive.  It is too simplistic.  As if getting paid were the ultimate end and that productivity can be ordained by an employeer of any stripe.  Digging holes and filling them up is not productive yet it is work.  Same with the Broken Window Theory to which Hazlitt deserves much credit in identifying.  Much of what is going on in the wild west of the deregulated market that we have, and who's profiteers would be calling the "free market" are provably anti-productive and parasitical.  Is research productive?  How about being a doctor?  Within the strict language, they are not, but we would both agree that they are useful; muddying what you profess about 'being productive'.

[myrkul]

I'd like you to reconsider what you consider productive.  It is too simplistic.  As if getting paid were the ultimate end and that productivity can be ordained by an employeer of any stripe.  Digging holes and filling them up is not productive yet it is work.  Same with the Broken Window Theory to which Hazlitt deserves much credit in identifying.  Much of what is going on in the wild west of the deregulated market that we have, and who's profiteers would be calling the "free market" are provably anti-productive and parasitical.  Is research productive?  How about being a doctor?  Within the strict language, they are not, but we would both agree that they are useful; muddying what you profess about 'being productive'.

What sane employer is going to hire people to dig holes and then fill them (assuming there isn't something else going in the holes, like wiring)? No, It takes a government to throw money away like that, simply to create employment. Research and doctoring, under my definition, both fit 'productive'

[niemivh]

I'd like you to reconsider what you consider productive.  It is too simplistic.  As if getting paid were the ultimate end and that productivity can be ordained by an employeer of any stripe.  Digging holes and filling them up is not productive yet it is work.  Same with the Broken Window Theory to which Hazlitt deserves much credit in identifying.  Much of what is going on in the wild west of the deregulated market that we have, and who's profiteers would be calling the "free market" are provably anti-productive and parasitical.  Is research productive?  How about being a doctor?  Within the strict language, they are not, but we would both agree that they are useful; muddying what you profess about 'being productive'.

What sane employer is going to hire people to dig holes and then fill them (assuming there isn't something else going in the holes, like wiring)? No, It takes a government to throw money away like that, simply to create employment. Research and doctoring, under my definition, both fit 'productive'

So anything where the costs are externalized wouldn't fit this bill?  Where a private business creates effective 'holes' that the public must fill and where the net benefit to the system as a whole is negative due to the cost externalization?

If you follow my Tobin Tax thread we've proven (at least it's yet to be refuted) that much of the trading going on is totally parasitical.  Is that productive?  How about mega leveraged banks gambling with derivatives?  Is that productive?

[myrkul]

So anything where the costs are externalized wouldn't fit this bill?  Where a private business creates effective 'holes' that the public must fill and where the net benefit to the system as a whole is negative due to the cost externalization?

Externalized costs often end up benefiting the customer, psychologically, at least - case in point: Self-checkout lines. I know I'd rather run my groceries across the scanner and bag them myself, than let the pimply-faced high-school kid toss my eggs into the bag, on top of the bread... but under the can of beans. The other, negative cost externalizations, say, polluting, get handed right back to the business in the form of damage claims.

As for the rest, I am not so conceited to believe I know the answer to everything, so rather than debate poorly, I will avoid that issue. Perhaps someone with better knowledge can answer you re: derivatives.

[niemivh]

The Next Chapter of Bankruptcy is a Short One:

Chapter V: Taxes Discourage Production

This chapter is like a small mud puddle.  It's trite and blurs the lines of everything he's talking about into a whirlwind of confusion.

He argues basically the quintessential argument of the modern day Republicans: that lowering taxes as a general rule promote 'jobs'.  Another often used term is "job killing taxes" as if all taxes were equal.

The argument that people will not start businesses because they have to pay corporate income taxes may sound reasonable at first blush but in practice is absurd.  Is there any entrepreneur that has a wonderful idea and that is able to convince venture capital and bank(s) to lend him money to start his firm going to simply not attempt to enact his vision because he'll have to pay a supposed 48% corporate tax on his earnings (using the author's numbers)?  That he would enact it if he could be worth 10 million but won't (in an Atlas Shrugged fashion of going on strike) because he'll only be able to make 5 million?  I agree that if this number was 90% or something close to that no company could even survive under that level of taxation and no reasonable policy maker would ever attempt to create policies that would result in national suicide by choking off the private market like that.

But the arguments posed by Hazlitt are presently being used by modern Republicans to justify that even 0% tax is too much.  Various Republican politicians when confronted with the fact that various mega-corps pay 0% tax, they say that they pay too much in taxes.  So 0% is too much, think about that.  When told that many mega-corps like Goldman Sachs, GE and many others pay no tax through loopholes and effectively get corporate welfare in the form of subsidies and tax refunds on taxes they didn't pay then does it set off any alarm bells in your head that maybe this whole argument was corrupt from the get go?  Nay, not 'corrupt' (for that is too simple) but just the self interest of a specific group (the rich and corporate interests) expressing their wants in a veiled means.  For those that argued that 48% was too high just as equally argued that 40% was too high, then 35% and onward and onward until they pay nothing - then further onward when we start to pay them.  Do you notice a pattern of who's interests Hazlitt supports in practice?

Why is it that Hazlitt alludes to a number in saying: "A certain amount of taxes is of course indispensable to carry on essential government functions." without ever specifiying a number or a rule that could determine what that number should be?

A few sentences later he says "But the larger the percentage of the national income taken by taxes the greater the deterrent to private production and employment."  There are numerous problems with this sentence but we'll focus on just one: presently many corporations pay 0% or near 0% corporate taxes.  Hazlitt argues in the previous sentence that there are "essential government functions" yet an increase from a 0% tax rate would be a "deterrent to private production".  While not directly contradictory these two things are at such odds with each other that any spread of taxation, or lack thereof, can be justified in any degree.  In addition they are at odds with theories he later advocates in the book regarding saving.  What is an essential government function?  How do you validate that a company was going to use that money for 'production' and not golden parachutes for the CEO and upper management?  This is vague on purpose, like a bible verse that can be used to justify anything, this and other similar arguments have been used to reduce corporate taxes down to nothing.

Nobody can argue that we aren't much further down the road of less taxes on the rich and corporate powers than when he wrote this yet nobody can argue that the power that the rich and corporations have used with this additional money is to buy up our political system at the expense of the rest of us.  By this same token the middle class are much poorer as these policies have moved forward.

He then steps into briefly talking about personal income taxes on the higher income level folks.  I'm not the hugest fan of income taxes at present, I think that they are a method by which unscrupulous politicians basically buy patronage from the voters with their own money, and an elimination of them (at the lower end) would perhaps cause a more nuanced discussion of what creates prosperity rather than the mouth-breathing moronic level of discourse that we currently have where voters will follow a President off a cliff if only he lowers their income taxes.  Yet I can see the lack of justification that Hazlitt has for removing them and the benefit to society when they are applied in a progressive fashion.  That is presently not what we have at all in our system, and if they were re-implemented as originally intended with the middle class paying very little or nothing and it starting to go up at the upper-middle class levels then it would radically change the discussion in the country.

***CASE IN POINT***
http://www.youtube.com/watch?v=zeN0JRFGPD0&feature=related

Such as this poor wretch at a Tea Party convention, who thinks that even though she works 70 hours a week that her primary problem is 'government spending' and 'I pay enough taxes already'.  Sorry maam, but first of all your primary problem is that you work 70 hours a week.  The second problem you have no idea why you work 70 hours a week just to make ends meet, you are just repeating things you heard Glen Beck say.  Lastly, the fact that you work 70 hours a week is not come sort of credential for being an expert in economic policy just as being a janitor for decades at Intel doesn't make you qualified to be the CEO and just like being a solder in the trenches for X number of years doesn't automatically qualify for being a General.
***CASE IN POINT OVER***

The reasons that a highly progressive income tax isn't 'bad' much less 'bad for investment':
1)  The allocator of resources in a company (capital investment, money, labor) is primarily the CEO. If the CEO wanted to try to convince the board to put himself into a higher tax bracket (since he effectively has a liberal degree of opportunity to assign his own wages) that would make him pay 90% of it in income taxes the board would have little incentive to let him; in addition to the fact that the company is presently able to write that off as an expense with no upper cap.  So this is a multi-causal problem to which having a very high progressive income tax can do much in stopping.  The other is capping or eliminating the ability for the corporation to write off the entire pay of the CEO.  So what happens to that extra money that would have gone into the pockets of the CEO and upper management if prevented by tax policy?  Well, if we look at history that money was reinvested into the company and rose everyone's standard of living as a function of economic growth.  Economic growth is much higher for everyone if there is the maximum amount of reinvestment, this is what the very high progressive income tax promotes.

2)  Assume the CEO got the money in the above scenario (since we live in a world now that has very low income tax rates (on the high end), the ability for the company to write off the 'salary' of the CEO in addition to massive loopholes and tax avoidance).  Now what does he do with it?  Does he start a new startup company?  Not likely at all, after working for a company enough to get a CEO position why start over as a 'small timer' again?  Why do anything but perform your tenure at the company you're CEO at and then retire?  Life is too short to not enjoy a hefty retirement with millions in the bank.  Ok, does he invest it all as an angel investor?  Not likely again.  Most start-ups are bank funded or are only willing to deal with private investors in a very limited degree as they don't want to be owned completely just for the function of being able to borrow money, most would certainly rather go public than turn to 'angel' investors.  Entrepreneurs start businesses; people that make a bunch of money in the stock market don't, people that are existing CEO's don't, people that come from dynastic families of great wealth don't, at least they don't in any greater observable proportion than the general populace - or in any statistics that I've ever seen.  If you want evidence of this please look at Fortune 500 CEOs and what their background was, if this 'theory' that the rich create jobs and by extension taxing the rich is a destroyer of jobs was correct you'd at least expect to see a larger proportional amount of the previously rich in these roles.  For those of you who are unaware: the point of being rich is that you no longer have to work; and there are very few that could honestly say that they would continue to do the hard work it takes to be a CEO when they could otherwise be living in the lap of luxury.  So what becomes of the extra money the CEO was able to pay himself due to a lower tax rate on high earners?  Well, money is actually quite easy to predict where it'll go: to the place with the highest profits and least risk.  He'll likely turn his money over to a hedge fund, investment firm or bank that will use his deposits to determine how much debt can be issued (notice that they aren't actually investing his money, rather it is collateral and a limitation against the newly issued debt).  Here we begin an interesting point of argumentation, but I think I've shown that there isn't a disagreement that 'trickle down' economics (to which this really is) has worked.  In summation: A.) People with ideas start businesses not those with incredible sums of money.   B.) Newly founded businesses typically borrow from banks and are self financed by-in-large over the private investor to which lower income taxes benefit.

3)  The upper income earners spend very little of their income in comparison to the lower and middle classes spend.  This is Keynes and was cited earlier in the thread.  So having a massive concentration of wealth in the system is effectively removing a large portion of that money from the economy of buying and selling goods and consumption.  This is a weaker argument than the previous two, I'm not that big of a fan of it, so I expound on it unless someone else wants me to further discuss it.

I've wrote 4 pages on dissecting a chapter that is literally 2 pages long so while there is much more I could say on the topic I'll leave it at this for now.