This. America is run by the rich for the benefit of the rich, and most Americans clearly buy into the idea that wealth is a direct reflection of your moral worth. There’s no such thing as bad luck; if you are poor, it is because you are lazy or evil, and in either case deserve your suffering. We don’t like welfare because there is the risk it might actually help poor people and alleviate their suffering, and we think they deserve their suffering. Poverty is about punishment in the eyes of America. And terror; it is supposed to be awful, in order to enforce “labor discipline”.
- I don’t think you can argue with the fact that if welfare was raised to $40,000/year many people would quit their jobs. I would suggest that many of these people would continue to live productive lives. Some would work towards starting a business, and some might keep their jobs in some form (on their terms) and continue contributing to the market (eg volunteer 20h/week at their old job, which some lottery winners seem to do). But you have to admit that the market and/or the needs of society might no longer be met in an optimal fashion, since there are now less people contributing to meet society’s specific needs. In other words, their new form of “productivity” may not be as economically productive as before. Would you agree or disagree?
What would happen if welfare was increased to a more reasonable $15,000/year (I actually have no idea what welfare rates are at the moment, unfortunately)? I suppose some might quit their jobs. But I feel that those who do, would still contribute to society on some level.
- In regards to the second part, are you saying that the emotional/moral arguments that conservatives put forth, masked behind reason, are not valid - but that liberal emotions such as compassion and altruism are? I’m not really clear on what you are trying to say here.
$40K is too high, but $25K I think is a possibility. A great many burger flippers and retail clerks might quit their jobs, but sitting on the couch doing nothing gets old quick for most people. They might not pursue the most ‘optimal’ work, whatever that is. But they would pursue whatever gave them the highest utility - which could be volunteer work, raising their family, going to school, or whatever they decide since they no longer have to work out of necessity. The point is financial or physical security is the least of reasons why people chose their occupations. Our specific needs are met by a fairly small percentage of the population. Most people work in the service sector or the knowledge sector, where most of that is make work, since we do need to find jobs.
As automation increases we are liking to shift to a “Cafe Society” economy, where most people pursue artistic and creative work, not to ‘earn a living’ but to enjoy life. That percentage is one of the fastest growing segments of the economy. And there is very little that is efficient about art, but I would say that it is more optimal, though not the most productive.
Screw productivity. If all I need is $25K to enjoy life, that is my goal. Again, most people don’t try to maximize their earnings, or there would be an even greater surplus of people trying to work on Wall Street. Most just want to be comfortable - satisficing is the goal.
As far as conservatives emotional arguments, I cannot determine their validity, since they only give ‘rational’ reasons most of the time. But knowing my share of conservatives off the board, and being raised in a conservative family, their desire for tradition and old-fashioned values is based more on an emotional basis often grounded in religious values than reason. And they are masters of conditional love. They don’t feed the poor because the poor are hungry, but so they can hear the word of the Lord while they slurp down the spaghetti. No thanks.
And personally anyone who thinks the poor are lazy is ignorant. They are often defeatist or fatalistic and see no point in striving for more than the bare minimum, because they spent the first part of their lives watching their parents working hard, and yet they still live in the same crappy community, the car always needs repairs, and at least one major appliance is guaranteed to fail every year since they could only afford a used one to begin with, and they know their kids will go to the same crappy schools and the cycle will continue. Why should they develop a strong work ethic since they have never seen a payoff. But they do know how to hustle, and make some cash under the table so they can kick it on the weekends, and have a BBQ on the holidays.
And if the rural poor could not support themselves through hunting and farming, those rifles would start to be aimed elsewhere. And the ramshackle house their granddad built is the only major asset they have. They are rarely going to risk selling it to move somewhere else for a better opportunity. Plus, who the hell would they sell it too?
AP: You basically just raised the minimum wage to > $12/hr. Do you know the effect that would have on inflation? Your $12/hour would soon not get you the lifestyle of someone who makes that kind of money in the environment we have today. What do we do then-- raise the minimum wage again?
The price of goods is set by how much money people have to buy those goods. Flood the market with money, and prices go up. $25k/year would become the new poverty level.
I’m no economist, obviously, but I do have a question:
If you raise the minimum wage by 50%, does that mean the prices of things will go up 50% too? I don’t think so… because there are people who earn more than minimum wage, and they will help moderate any price increases (since their wages did not go up). Wouldn’t you have to increase EVERYONE’s wages by 50% to get something approaching a 50% price increase?
So a 50% minimum-wage increase may only mean a 15% price increase, for example. Wouldn’t you say this still accomplishes the goal of minimum wage: to raise the standard of living for those on the bottom?
I don’t know how much prices would rise, but even if it were only 15% (and I think it would be more), you just screwed over the entire middle class by lowering their standard of living by 15%. And you just killed a lot of jobs that are no longer sustainable in the US. We might be outsourcing to Canada at that point. The very poor might be a little better off, but many more people would be worse off. And the economy, as a whole, would take a hit.
At any rate, if you objective is to grow the economy, you don’t do it by killing jobs and raising prices. So no, raising the minimum wage to $12/hour is not a “good economic strategy”, per your OP. If all you want to do is redistribute the pie without regard to the size of the pie, them it might be a good idea.
No, I am not. Your ridiculous pretense that I am “sneaking in”: something I explicitly stated, and better than your response, means your either dishonest or have poor reading comprehension. What is important is that their motivations have nothing in the world to do with wealth production and do not lead to it.
So in other words, you are now agreeing that it’s economically disatastrous. Thank you for finally accepting this.
That would be you saying things I did not say. I would appreciate it in the future if you didn’t stuff words into my mouth.
A useless half-truth. They are getting somethign out of it. Overtime is often expected and whether or not you like it, if you do it you think it worthwhile for the money offered in salary. If not, you quit. People work for what they think is a worthwhile reward - and if they value more money than time, they will work. Frankly, nobody cares what you think is worthwhile or “enough.” It’s about what they think is worthwhile or “enough.”
In other words, you have a strong emotional reaction in favor of the poor and pity or sympathize. That’s just peachy, but it has nothing to do with economics or good sense.
No, because you completely fail to see that decisions are made on the margin. (You talk about it, but you apparently don’t seem to udnerstand the idea.) Always on the margin. People who pursue money will tend to do so unless a truly impossible amount of welfare is offered or they collect a huge amount of money. And many do quit once they have what they feel is enough.
However, vast numbers of people do not feel that way. Whole swaths of society would indeed choose to quit work if they could. And welfare will allow many to manage. doing just that.
You have no idea what you’re talking about, do you? That’s one of the most irrational statements I’ve ever heard. I have no idea how you umm, “logically” derived that concept from what I said, but it’s not worth engaging.
Epic Fail.
No, they don’t. They may change how complicated the hoops are, but you cannot get around the issue of production efficiency.
None of which changes the fact that he is right.
Which has nothing to do with what I said. In fact, I exaplined exactly how you manage that. But it has jack-all to do with income inequality. And whether you like it or not, the two are empircally proven to go together. It varies over time, but the general direction does not change.
Which is irrelevant because perceived needs are actual needs as far as economics goes.
Really? Everyone I know is very much concerned about their profit. It’s simply their personal profit. Youre the ones claiming poeple will go out and find productive work when they have no financial incentive. I’m the one sanely smacking you over the head and pointing out that they’ll do what makes them happy, which has nothing to do with useful economic production.
Ah, here we come to it. You have an emotional need or reaction, and the fact that you’re dropping your moral judgement while whining that people’s personal amusements not being productive or efficient is a “moral judgement”
I can demonstrate it every day, just by showing what people choose to do with a windfall. Or for that matter, what happened with welfare reform.
I haven’t heard your argument, and I don’t really care. What I do object to is utter tripe being passed off as received wisdom. Wherever you got your so-called knowledge is irrelevant, but I won’t stand for it.
Here is the basic, cruel end of the stick: welfare is economically inefficient. It makes us poorer as a whole. This is verified. It’s up to you to decide for yourself how much is worth paying to take care of poor people if that’s your bag. But don’t roll around pretending it has anything to do with improving the economy.
Borzo: on the Minimum Wage.
I won’t rant on this, but it is impossible to win by raising the minumum wage. Ultimately, all the gains in wages are eropded by inflation, true, but moreso by destroying jobs which would have been open. Inflation is actually only a small part.
This is the fundamental flaw in your argument. Only a small portion of a ‘rich’ persons wealth goes to consumption goods such as your gold watch or foreign sports car example. Even then, someone has to build those things…and even if that someone lives in another country, it’s a job that has a non-zero benefit back to the US. If in no other way than in the people who bring the watch or car into the US, ship it, market it and sell it to the rich guy or gal (and there are other ways…the German worker building that expensive sports car might be drinking a coke or eating at a McDonalds for lunch, or watching a US movie on Friday night…or buying some other US good or service with part of his or her paycheck).
And like I said, that’s only a small fraction of a ‘rich’ persons wealth…because if it’s not just a small fraction then said ‘rich’ person won’t be staying ‘rich’ for very long. The majority of any ‘rich’ persons wealth is, of course, invested…and any smart ‘rich’ person is going to have a diverse portfolio (that’s how ‘rich’ people stay ‘rich’), and it’s going to include US flagged companies as well as foreign or multinational companies. As mentioned, even foreign or multinational companies have a non-zero benefit back to the US.
And, of course, since said ‘rich’ person is a US citizen they are going to pay taxes…lots and lots of taxes. Now, you may be like the majority here on this board and feel that they aren’t paying enough…but, remember, the top 1% pay over 20% of the over all Federal tax…and the top 5% over 40% (maybe over 50%…I misremember). Think about that…the top 5% pay either almost as much or more than the other 95%.
As for the deeper question of why welfare doesn’t make good economic sense or isn’t a good economic strategy, I’m unsure what that even means. In our society it’s basically unacceptable to allow people to fall below some level of poverty. Whether that be starvation level, or something higher, there is going to be a bar set by society. WHERE the bar is set is open to debate…some folks want it higher than it currently is, some folks lower, and some folks think baby bear has it just right. But there is going to be some bar somewhere because it’s no longer acceptable to have no bar at all in any western nation…including the US. And I think one of the factors is that we don’t care if it makes ‘good economic strategy’ or sense…we do it because we feel compelled to do it. And that’s the bottom line.
-XT
As usual XT is flat out wrong. here are i5 charts showing wealth and taxes for Americans. One percent on the people own over 30 percent of the wealth. And for some reason, even as their percentage they pay for taxes keeps dropping, their share looks huge. They pay what looks like a lot because they have enormous ,outrageous sums of money. If you compare your tax load to a billionaire it is lobsided. He pays millions a year. You on the other hand pay less than 50,000 . He is obviously getting cheated. You should also pay millions. Perhaps someone can explain to you why you can not. It seems to elude you.
Did you know your cite actually doesn’t address the point I was making, or have any relevance at all?? Well, no…you probably didn’t. From here:
So I was wrong…they pay more than I said. Sue me. Here is what the top 5% pay:
Again…I was wrong. They don’t pay 40 or even 50%…they paid 58%.
-XT
The real value of welfare is to prevent the costs of extensive destitution. When people cannot meet their basic needs they will not abide by a social contract, nor are they morally obligated to. In those circumstances they increase the public costs by committing crimes, spreading disease, and having children that increase the ranks of the destitute.
Whose motivations? The people in the US today who are increasing our productivity for very little reward? You convict yourself many times over of my charge - let’s see.
Gardening is economically disastrous? Paying people to dig ditches is economically disastrous? You’re not making a lot of sense.
But people do stay, don’t they? If they didn’t, there would be no overtime. In some places, everyone stays, so staying is not going to give you much of an advantage. But none of these people are doing the minimum needed to put food on the table, which is what you are accusing pretty much everyone of, and especially those on welfare.
In other words you have no answer to the question, which was:
Fact is, when there were jobs available, during the Clinton years, these bums on welfare for some reason went and got them. Able bodied men aren’t filling the welfare rolls, women with children and those who can’t work do that. And I agree that we should reduce the pregnancy rate (and it is dropping) but we should do it by easily available forms of birth control. Calling names and pointing fingers has never worked.
If you didn’t understand my use of the word margin, you don’t understand enough about economics or business to even talk to.
Sure, $100,000 of welfare is foolish. All we are asking for is enough to feed, house, and clothe a family. Is that too much? And it comes back to my question - how do you know that a person who applies for welfare is doing it because she is lazy, versus someone who wants more money every bit as much as the biggest banker but who has had some bad breaks?
Now, who is getting emotional? Your hatred of the poor is noted, but that so many of them got jobs when they were available seems to contradict your statement. And we still have the problem of what to do with all these lazy people. Let them starve? Kill them? In England in the 1830s the poor bred like crazy to try to make sure some child was left to support parents in their old age. The average poor family had 8 children. You want that here?
The claim was that efficiency is everything. Efficiency is a worthwhile goal for a particular manufacturing process, but it is a horrible goal for the entire economy.
An economy that truly believed that would have no other firms than monopolies or cartels, since those are the most efficient processes, and those firms would stifle innovation since they would only look for gains at the margin. It would also stifle entrepreneurship by creating very high barriers of entry. Creative destruction does not care about marginal gains, but entirely new processes or products that will often disrupt current production efficiency, but the primary goal is not increased efficiency, but the development of those new processes or products.
And that creative destruction is what creates a dynamic economy. It also destroys any attempt at attaining a general equilibrium or peak efficiency.
And again, efficiency can never be determined before the fact. It is a measure of past performance. No one can predict what the most efficient process will be, they can only determine what has been efficient. But an exogenous shock will almost always occur that will undermine that previous efficiency. And venture capital does not look for new and improved methods of efficiency, but whatever will generate a return on the capital.
They don’t or they may? And again, production efficiency is a manufacturing goal, not an economic goal. The economic axioms or rules of the neo-classical school have been presented as a given, even though institutionalists and others have challenged those assumptions since the beginning. They are not immutable, but the product of the cultural and social environment, most often enshrined in the legal system of an economy. Before capitalism, it was feudalism, and the ‘divine right of kings’ was the immutable principle. Before that it was subsistence economics, which is more susceptible to the laws of nature, but we left that stage long ago. And capitalism is not the end of history.
Adam Smith’s claim that rational self-interest is primary motivation has been discarded by nearly every discipline except for the neo-classical school, since it makes for a nice elegant model. Pardon me if I find that 20th century empirical behaviorists such as Maslow provide a more compelling explanation than the hypothesis of an 18th century philosopher. Incorporating a multivariate analysis does tend to disrupt the elegance, but economics is a complex system, not an elegant one.
Actually, I don’t see an explanation, just a false assertion:
Non-zero sum economics - future gains are distributed such that those who currently have less receives a greater share of those gains than those who currently have more. Voila! Total wealth increases and income inequality decreases. Economics only demands winners and losers if it is postulated that it is a zero-sum game and improvement can only come at the expense of another.
And the entire growth of the last century distributed gains across the entire spectrum drastically reducing the inequality that existed in the previous century. By your logic, only the robber barons would be enjoying a 21st century lifestyle, and the rest of humanity would be stuck living in 18th century tenements or worse.
It is entirely relevant. Actual physical needs can only be provided in a limited number of ways - X amount of calories, Y amount of shelter, etc. Perceived needs can have an almost unlimited number of ways to fulfill them.
How many times do you need to be hit on the head before you put down Samuelson and read everything written since that text was created. The majority of people only seek sufficient gains, not the maximum. The majority of people consider happiness far more important that ‘useful economic production’. But as it works out, most people engage in occupations or vocations that have the side benefit of being economically productive. An author or musician does not create works to make money, but it is a nice bonus when their works are successful. But as critics will tell you, how much money a work earns has no correlation as to whether the effort had merit.
Now who having an emotional reaction. A rather sad sentiment on a board dedicated to fighting ignorance. Your loss, not mine.
Only according to the neo-classical school, and by ignoring almost every other school of economics. Some welfare systems may lead to economic inefficiency - but that is not the damn goal of economics.
The purpose of economics is enable the production of sufficient resources and ensure their equitable distribution to allow as many as possible the opportunity to pursue a higher quality of life according to their personal utility. It has nothing to do with efficiency, general equilibrium, profit maximization, rational self-interest or any of the axioms of neo-classicalism.
I feel confident in safely ignoring any economic model that does not pursue that purpose, especially since alternative models have been created which do fulfill that purpose. The claim that the neo-classical school is the end all be all of economics is the same as claiming Euclid was the end all be all of geometry.
Euclid worked damn well as an approximation, but as we learned more about the actual universe we live in, we realized it was not the most accurate depiction.
The same is true of the neo-classical school, but the plutocrats realized it is a wonderful tool to enable them to claim a ‘rational’ basis for hoarding wealth and denying an equitable distribution. The sooner it is cast aside, the better. It may be helpful in teaching certain concepts, just as most people learn Euclidean geometry first, but it has extremely limited value outside of the classroom.
Ceteris paribus that would be true, which is the main problem with most economic analysis. They only observe the effects when one variable is changed. If welfare was increased to that level, and nothing else changed, it would lead to inflation.
So trick is to see what other variables have to be changed with that to mitigate inflation. I would start with an income cap as well as a base. So that economic gains are distributed more equally.
Before all that though, I would rather see policies that make goods reflect the true cost of the production (i.e. social accounting.) Prices are partly determined by the money supply, but the basket of goods available is determined by the costs of production, and most prices fall to that level.
Those costs are determined mostly by technology which is driving down the cost of most goods, especially basic essentials. The buying power of a person at poverty level has increased, which is the perhaps the main reason people have been willing to accept the increasing inequality. Real purchasing power has increased, even though wages have stayed flat or fallen, and has increased faster than nominal inflation.
If that trend continues, and I think it will unless we have a major energy or food crisis in real terms, not nominal terms, increasing the minimum to wage to $25K would enable more real purchasing power even with an increase in nominal prices. Even now, life at the US poverty level is still a hundred times better than poverty in the non-industrial world - about half of that in terms of income, and the other half in terms of access to resources. Even crappy schools, buses, and Medicaid are better than none.
But the problem is that it is also a hundred time worse or more than those at the top of the pyramid. Though I would rather see an economic pyramid, than the Space Needle which is being created.
We also need to change the mindset that a basic income is not a handout, but a dividend. We live in the richest society this world has ever seen. It would be nice if we acted like it and stopping pretending Malthus was around the corner or that Hobbes is sneaking up on us.
You know, you really should bring this up, and some of the other ideas that I skimmed, as a senior thesis to your econ department. I’m curious if you’ll either be laughed out of the department or beaten out.
I’ve been meaning to reply to this thread but as I am overseas again, many points I would’ve made already have been made. Anyway…
This is how the science of economics (or any science for that matter) works. You keep all constant and change one variable. Otherwise, models, hypothesis, theories, etc., wouldn’t make any sense.
The trick to making communism work is to have a large enough bureaucracy to study the effect on prices to ensure that “from each according to his ability, to each according to his needs.”
Yes, you didn’t say this exactly, but this is where such thinking leads. If you’re going to wish for a magic pony, you might as well wish big.
Which is what you want (prices to fall to production) because 1) it has no value judgment; and 2) it shows efficiency. The magic of “social accounting” invariably leads to someone’s value judgment. If you’re aiming (even though not intending) for a communist society, you might as well wish for that, too, because individuality necessarily means someone is going to have a different value judgment.
Again, which is what a society should want. That’s why income inequality is a red herring, and anyone arguing for government controlled income equality is really whining about how someone (or group) shouldn’t make more money, for the simple reason that it seems wrong.
John Mace already answered this. This leads to inflation, plain and simple. And, not COLA-type, make-everyone’s-bank/savings-account-happy inflation, but the real, wealth destroying type. With increases in automation and productivity, there are some jobs/activities/production, that will fall below the minimum wage. The more you prop up/subsidize those activities, the more you increase the opportunity cost, increase inefficiency, decrease innovation, and increase inflation.
You would have to change human behavior. Keep on wishing.
I’m at a bit of a loss as to how to respond to this, and I think the reason is that I don’t know what your goal is. Are you saying that these policies will be a “good economic strategy” as the OP is asking, or are you saying it will be good social policy? IOW, if we institute your policies, will GDP go up or down? If it goes down, then it’s not good economic policy. Whether or not it’s good social policy, that is another question entirely.
A higher level of support for the poor would create demand. Demand would create jobs. Jobs would add to the tax collections and help the economy. None of this would be a threat to the wealthy. It is excellent economic policy.
Ah, but here’s the thing. How much “higher” are you making the support? You can’t do it substantially without causing price increase which affects everyone. And when prices rise, you lose jobs and lower the overall standard of living.
You guys keep thinking there is some sort of economic analog to a perpetual motion machine. There isn’t. If you want to redistribute income, fine. Just say so. But don’t pretend you’re improving the economy, because you aren’t.
So by that logic we should massively increase income taxes in order to improve the economy. Since, apparently, the less money people have the better off the economy is. :rolleyes:
:rolleyes: Nope. You just made that up, and it has nothing to do with the “logic” of my post.
Firstly, the people they are talking about “helping” don’t pay any income tax.
Secondly, when you raise prices you effectively lower consumer’s income, which would indeed have a similar effect as raising taxes would.
So, by my logic massively increasing income taxes would damage the economy.
Are there any other logic problems you need help with?