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Tax GranadeThe US military defines the term Force Multiplier as:

A capability that, when added to and employed by a combat force, significantly increases the combat potential of that force and thus enhances the probability of successful mission accomplishment (JP 3-05.1 - Joint Special Operations).

Basically, in the military a force multiplier is typically some sort of technical gadget that allows a few people to kill a great deal more. For example, an automatic weapon is a force multiplier when compared to a hand gun. A shoulder-fired heat-seeking missile is a force multiplier when compared to an automatic weapon. A tactical nuclear missile is a force multiplier when compared to a shoulder-fired heat-seeking missile. And so on.

LINEAR AND NON-LINEAR

Before we even begin to get into today's topic, we need to address something else having to do with math. Yes, we know. You slept through all your math classes in secondary school and have no use for it beyond basic arithmetic. However, believe it or not, math is actually quite helpful when it comes to understanding reality.

Linearity

What is "linearity"? In mathematical terms it simply means something that behaves like a straight line. Of course, there is a very strict mathematical definition with which we need not concern ourselves. The idea of a straight line suffices.

Human beings have the tendency to operate and think in terms of straight lines. We understand that if we need to walk two kilometers it will be more tiring than to walk one. We grasp the idea that if a price goes up by 20%, this is twice as worse as if the rise would be of only 10%. Linear stuff we get.

Why did humans evolve to understand linearity? Who knows, however we suspect it was because it is far simpler to make quick estimates and evaluations than anything else. If a Sabre-Tooth tiger is about to munch you, you need to know almost instantly if you can jump away from its path, thus avoiding becoming supper -which would, let's be honest here, put a negative slant on your entire day-. How do you do this estimate? You know how far you can jump and then you decide if this distance is achievable or not. If it is too far, you are probably better off just standing your ground fighting the beast. If it is shorter, you jump. But what if it is only 10% larger, what do you do? Well, you estimate if you can jump farther by 1/10 of the distance you can normally jump. You get a physical feeling for what this "1/10" means; maybe is just one foot or two and that is enough to make a decision.

Actually, linearity is so ingrained in our evolution, that we developed sensors which respond in such a manner as to make non-linear signals linear, so that we can deal with them. One such sensor is hearing. Our ears are designed to enhance low volume sounds and dampen high volume sounds. If our hearing system would be linear, we would not be able to hear low volume sounds and we would never be able to hear something of low volume in the middle of a high volume situation. We would not be able to hear a pin drop and we would not be able to hear a conversation in the middle of a concert.

Humans are all about linearity because we can deal with it quite easily.

Non-linearity

Unfortunately, nature is evil. There are many, many processes in nature which are non-linear. They are so because non-linearity offers something that linearity cannot (at least with ease): enhanced dynamic ranges. What this means is that by making small variations we can obtain large outputs. Thanks to non-linearity we get growth patterns from our DNA that translates into fingers, hair and eyes. Thanks to non-linearity the Nautilus can float. Thanks to non-linearity the time-space continuum exists. Without non-linearity we would not be here. Without non-linearity the universe as we know it would not be here.

So yes, non-linearity is important.

Why bother?

But why bother with this explanation? Because many economic processes are non-linear. As such, humans are ill-equipped to understand them. It is for this reason that economists (of the mainstream persuasion) are so adept to equations; so that they can deal with non-linearities. We, on the other hand, as we cannot use equations we are adept to use graphs and plots so that we may deal with non-linearities.

You need to know that it is not your fault if you can't fully comprehend what's going on even after a good explanation. Your brain did not evolve to give you this capacity.

However, having said that, you should also acknowledge that you can and indeed you should make an effort to at least get a feeling for what's going on.

Look at it in this way. You are crossing the street and a car is going towards you. What do you do? If the car is running at constant speed (a linear scenario) you more or less estimate where you are going to be when the car passes by your location. If the car will run you over, you speed up to avoid this less-than-desirable scenario. Simple, right?

But what happens with this scenario if the car is driven by a drunken guy driving erratically and accelerating? Well, the answer to this question is far more complicated in large part due to the fact that the scenario is non-linear. See the difference?

In the first scenario you more or less know what is going to happen. In the second you don't but you still can make an educated guess, and this guess matters. It is the difference between ending in the hospital or in your bed. Your guess matters.

Same in economic terms. What you can guess from a non-linear event matters. It is the difference between having a good retirement or dying homeless on the streets at an early age. See? It matters.

BREAD AND CIRCUS

One of the most basic tenets of politicians is never to let people know what is going on, but only to provide sufficient (and convenient) information that can be used to their advantage. Simple, right?

You, voter, don’t bother with this "economy" stuff. Too complicated. Besides, taxes are good for you. See, we only tax you X % of your salary; a nice linear figure, X %. And take a look at all the "free" stuff you get; free schools, free healthcare, free roads, free parks, free police, free everything! What else do you want?

Get the idea?

Bread and circus was good for Roman Emperors and they are still good for Modern Politicians. The only thing that changed were the togas. Other than that and perusing an old cliché you are the Christians and Taxes are the lions. Delicious!

Note: please see the Glossary if you are unfamiliar with certain words.

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