Farming as rocket science

Tuesday, September 17th, 2013

Americans have thought differently about agriculture for a long time:

Settled in a rush of migration, peaking in the 1880s, Nebraska’s prairies were parcelled out to German, Czech, Danish, Swedish and even Luxemburgish pioneers. From the start the plan was to convert Old World homesteaders to the scientific ways of the New World. As the system developed, Congress sent county agents from universities to teach menfolk modern farming and their wives such skills as tomato-canning. In the 1920s educational trains trundled through the prairies, pulling boxcars of animals and demonstration crops. At each stop, hundreds would gather for public lectures. Older folk resisted such newfangled ideas as planting hybrid corn bought from merchants rather than seedcorn from their own harvests. Enter the 4-H movement, which gave youngsters hybrid seeds to plant, then waited for the shock as children’s corn outgrew their parents’. Later youngsters promoted such innovations as computers.

Because America was a new country, argues Greg Ibach, head of agriculture in Nebraska’s state government, a primary concern was feeding a growing population and moving food large distances. Europeans fussed about appellations and where food came from. Americans “treated food as commodities”.

Such differences of history and culture have lingering consequences. Almost all the corn and soyabeans grown in America are genetically modified. GM crops are barely tolerated in the European Union. Both America and Europe offer farmers indefensible subsidies, but with different motives. EU taxpayers often pay to keep market forces at bay, preserving practices which may be quaint, green or kindly to animals but which do not turn a profit. American subsidies give farmers an edge in commodity markets, via cheap loans and federally backed crop insurance.

Posted in Business, Economics, Policy, Science | No Comments »

The greatest mystery of the Inca Empire

Sunday, September 15th, 2013

The greatest mystery of the Inca Empire was its strange economy, Annalee Newitz claims:

In the fifteenth and sixteenth centuries, the Inca Empire was the largest South America had ever known. Rich in foodstuffs, textiles, gold, and coca, the Inca were masters of city building but nevertheless had no money. In fact, they had no marketplaces at all.

Centered in Peru, Inca territory stretched across the Andes’ mountain tops and down to the shoreline, incorporating lands from today’s Colombia, Chile, Bolivia, Ecuador, Argentina and Peru – all connected by a vast highway system whose complexity rivaled any in the Old World. The Inca Empire may be the only advanced civilization in history to have no class of traders, and no commerce of any kind within its boundaries. How did they do it?

[...]

The secret of the Inca’s great wealth may have been their unusual tax system. Instead of paying taxes in money, every Incan was required to provide labor to the state. In exchange for this labor, they were given the necessities of life.

Of course, not everybody had to pay labor tax. Nobles and their courts were exempt, as were other prominent members of Incan society. In another quirk of the Incan economy, nobles who died could still own property and their families or estate managers could continue to amass wealth for the dead nobles. Indeed, the temple at Pachacamac was basically a well-managed estate that “belonged” to a dead Incan noble. It’s as if the Inca managed to invent the idea of corporations-as-people despite having almost no market economy whatsoever.

Let’s see, large estates worked by laborers who weren’t paid, but were fed and housed… Just imagine what the Romans could have done with a system like that!

Posted in Economics, Policy | 2 Comments »

The Hundred Years’ War, Taxes, and the Modern State

Wednesday, September 4th, 2013

The Hundred Years’ War brought us modern taxes and the modern state:

Prior to the Hundred Years’ War, it was expected that monarchs would finance their governments out of their own pockets, specifically, from money generated from their extensive landholdings. Imagine that the Bushes had to fund the federal government with money produced by their compound in Kennebunkport and Crawford ranch. Yes, monarchs could supplement their income with indirect taxes by tapping into the funds of all royal subjects, but this was rare and done only in exceptional, emergency circumstances. There was a medieval legal maxim that prevented permanent taxation (one that should be tattooed on the foreheads of all politicians): “With the cause having ended, the consequence must end.” That is, once the emergency was over, the tax must end too.

But that legal rule would be consigned to the dustbin of history with the Hundred Years War. As you might imagine, financing a war over generations is quite expensive. Paying for armies to pillage and rape for decades doesn’t come cheap. Thus, given the duration and intensity of the war, direct taxes became a routine part of life. It was as if governments now existed in a state of permanent emergency. To give you an example of the change, during the reign of Henry III of England, which lasted almost 50 years from 1216 to 1272, direct taxes were levied only 5 times, an average of once a decade. However, during the reign of Edward III of England, which also lasted 50 years from 1327 to 1377, direct taxes were levied 27 times, more than every 2 years.

So the next time you make out that check to the IRS, you can thank a war fought for the French crown 560 years ago.

Posted in Economics, Policy, War | 1 Comment »

34 Insights From Nassim Taleb

Monday, September 2nd, 2013

Shane Parrish shares 34 insights from Nassim Taleb:

  1. The artificial gives us hangovers, the natural inverse-hangovers.
  2. The only problem with the last laugh is that the winner has to laugh alone.
  3. Intelligence without imagination: a deadly combination.
  4. There is no more unmistakable sign of failure than that of a middle-aged man boasting of his successes in college.
  5. Never trust a journalist unless she’s your mother.
  6. One of life’s machinations is to make some people both rich and unhappy, that is, jointly fragile and deprived of hope.
  7. [If] someone is making an effort to ignore you he is not ignoring you.
  8. The danger of reading financial & other news (or econobullshit) is that things that don’t make sense at all start making sense to you after progressive immersion.
  9. It’s a sign of weakness to worry about showing signs of weakness.
  10. Friends, I wonder if someone has computed how much would be saved if we shut down economics and political science departments in universities. Those who need to research these subjects can do so on their private time.
  11. I trust those who trust me and distrust those who are suspicious of others.
  12. A good man is warm and respectful towards the waiter or people of lower rank.
  13. Journalists feel contempt for those who fear them and a deep resentment for those who don’t.
  14. When someone starts a sentence with the first half containing “I”, “not”, and “but”, the “not” should be removed and the “but” replaced with “therefore.”
  15. High Modernity: routine in place of physical effort, physical effort in place of mental expenditure, & mental expenditure in place of mental clarity.
  16. The only valid political system is one that can handle an imbecile in power without suffering from it.
  17. Journalists cannot grasp that what is interesting is not necessarily important; most cannot even grasp that what is sensational is not necessarily interesting.
  18. Never buy a product that the owner of the company that makes it doesn’t use, or, in the case of, say, medication, wouldn’t contingently use.
  19. Just realized that to politely get rid of someone people in Brooklyn say “call me if you need anything.”
  20. Injuries done to us by others tend to be acute; the self-inflicted ones tend to be chronic.
  21. We often benefit from harm done to us by others; almost never from self-inflicted injuries.
  22. You will never know if someone is an asshole until he becomes rich.
  23. When someone writes “I dislike you but I agree with you”, I read “I dislike you because I agree with you.”
  24. A great book eludes summaries. A great aphorism resists expansion. The rest is just communication.
  25. For a free person, the optimal – most opportunistic – route between two points should never be the shortest one.
  26. What counts is not *what* people say, it is *how much* energy they spend saying it.
  27. Used skillfully, a compliment will be much more offensive than any disparagement.
  28. I trust those who are greedy for money a thousand time more than those who are greedy for credentials.
  29. Just as eating cow-meat doesn’t turn you into a cow, studying philosophy doesn’t make you wiser.
  30. It is a great compliment for an honest person to be mistaken for a crook by a crook.
  31. Many want to learn how to memorize things; few seek that rare ability to forget.
  32. If you have something very important to say, whisper it.
  33. The ultimate freedom lies in not having to explain “why” you did something.
  34. A book that can be summarized should not be written as a book.

Posted in Economics, Nassim Nicholas Taleb | 1 Comment »

Ibn Khaldun on the Rise and Decline of Corporate Empires

Tuesday, August 27th, 2013

It should come as no surprise that Paul Krugman, fan of Asimov’s Foundation novels, has become a fan of Peter Turchin and Ibn Kaldun and has applied their ideas to Microsoft’s recent fall:

Yep: the uncouth nerds who created Microsoft became incredibly rich, acquired couth, and lost their edge; Apple stayed edgy in part because of Steve Jobs, but also because it was a disappointment for so long. And if its plans to build a high-tech Versailles are any indication, the now super-successful Apple may be heading down the same road as its one-time nemesis.

Both states and corporations are, at some fundamental level, cooperative enterprises, Turchin explains:

In the beginning we start with small groups of entrepreneurs randomly thrown together by chance. The vast majority of these incipient firms fail. Most of these groups will contain uncooperative selfish knaves. All such groups will fail with 100% probability; only groups consisting entirely of cooperators have a chance. However, the majority of such potentially cooperative groups will still fail because they will be unable to hit upon the right combination of social norms and institutions to enable them to cooperate effectively. As an example, people coming from different ethnic backgrounds often find it difficult to concert a cooperative action, simply because different cultures evolved different ways of cooperating, and these may not work well when thrown together.

In the next step, the majority of even those groups that consist of cooperators and have acquired effective cooperative institutions will fail — because they don’t have the right product, or perhaps because they are simply unlucky. But at least they have a chance, whereas groups with knaves and lacking the right institutions have no chance at all.

This is a typical cultural evolution scenario. At this stage we have a lot of variation, with all kinds of incipient firms churned out, and a selection mechanism that weeds the ones that don’t cut the mustard. This is completely analogous to the Ibn Khaldun situation of the stateless ‘desert’ where groups that can’t cooperate together in defense (and predation on other groups!) are rapidly eliminated.

Only those Bedouin groups that wield a lot of asabiya survive and thrive in the competitive desert. Analogously, only those start-ups that have a lot of — well, asabiya — survive and thrive in the competitive markets.

So that’s how high asabiya firms are generated. What happens next? Next they need to expand without losing asabiya. That means that they need to be very picky about accepting new members (keep those knaves out) and have another set of institutions that would allow them to assimilate newbies to the firm’s social norms of cooperation. If they surmount this challenge, they will expand and become a huge corporation.

But eventually the rot sets in. More and more knaves weasel their way in. The institutions that sustained cooperation begin to be undermined by the selfish behavior of freeriders. Moralistic cooperators, in response, withdraw their cooperation, because they don’t want to be taken advantage of. Prosocial founders and early joiners leave the company and join more cooperative ones, or start new businesses.

Eventually knaves reign and the company is really moribund. However, it’s big and has a lot of inertia and so it survives — for a while. Then, however, a particularly greedy set of executives, or a market downturn, exposes its inherent weakness and the corporation goes under. You can substitute ‘executives’ with the ‘elites’ and ‘corporation’ with ‘empire’ and you have the gist of my theory of why empires collapse (however, the time scale on which firms rise and fall is much faster than that for empires).

And that’s how I see the fall and decline of imperial corporations, when looked though the lens of Ibn Khaldun’s theory. I won’t name names, but I am sure we all can think of a number of examples of such moribund corporations.

This matches Carol Quigly’s notion of institutional imperative, which T. Greer summarizes:

According to this imperative, organizations are formed as a means to accomplishing a stated goal. These organizations are thus instruments whose role is limited to the function they were designed to perform. Over time these instruments tend to denigrate into institutions — organizations who exist for their own sake, devoting resources to protecting their position instead of directing resources towards the fulfillment of their designed role.”

He continues:

What I find most interesting about tying the institutional imperative directly to asabiyah is cycles – or rather, the cycles within cycles. In the case of American business, you have the larger asabiyah cycle of American society as a whole (visible among our top executives today – they are far less ‘pro-social’ than their counterparts in the 60s), but then smaller cycles of specific organizations within American society itself (in this case individual firms).

The neat thing about free markets is that is allows “moribund corporations” to break apart without the dreadful consequences we usually associate with the collapse of nations and states. Indeed, because these corporations are usually replaced by their more instrumental peers, the business asabiyah cycle is a great boon to larger society.
I imagine similar cycles are present in all human organizations, including most bureaucracies. The lean, can-do OSS of the Second World War slowly morphs into the moribund CIA of today, and so forth. Only difference is that there are no Bendouin rival bureaucracies to push them out.

Gene Anderson adds a few more points:

One might add that asabiya doesn’t just happen; in Ibn Khaldun’s theory, it requires a leader with charisma, concerted ability to manage force, and generosity, who emerges in a competitive situation where the best leader unites the biggest force and therefore wins. Then when an established, mature government appears, charisma, generosity and whatever aren’t so much use — establishment sets in, dull gray figures take over, and things unwind. Ibn Khaldun figured about 100 years per cycle.

The best possible combination for collective action might be a Machiavellian leader and completely prosocial followers, Turchin notes.

Posted in Business, Economics, Policy | 2 Comments »

The Post-Productive Economy

Thursday, August 22nd, 2013

Kevin Kelly takes a look at some farm houses under construction in remote areas of Yunnan province China:

They were not unusual; farmsteads this size were everywhere in rural China. Note the scale of these massive buildings. Each support post is cut from a single huge tree. The massive earth walls are three stories high and taper toward the top. They are homes for a single extended family built in the traditional Tibetan farmhouse style. They are larger than most middle-class American homes. The extensive wood carvings inside and outside will be painted in garish colors, like this family room shown in a finished home. This area of Yunnan is consider one of the poorer areas in China, and the standard of living of the inhabitants here would be classified as “poor.”

Yunan Mansion 1

Part of the reason is that these homes have no running water, no grid electricity, and no toilets. They don’t even have outhouses.

Yunan Mansion 2

But the farmers and their children who live in these homes all have cell phones, and they have accounts on the Chinese versions of Twitter and Facebook, and recharge via solar panels.

Yunan Mansion 3

Robert Gordon asks, Is U.S. Economic Growth Over?, and answers, yes, because our current information revolution is obviously not as important as previous industrial revolutions:

With option A you are allowed to keep 2002 electronic technology, including your Windows 98 laptop accessing Amazon, and you can keep running water and indoor toilets; but you can’t use anything invented since 2002. Option B is that you get everything invented in the past decade right up to Facebook, Twitter, and the iPad, but you have to give up running water and indoor toilets. You have to haul the water into your dwelling and carry out the waste. Even at 3am on a rainy night, your only toilet option is a wet and perhaps muddy walk to the outhouse. Which option do you choose?

[...]

I have posed this imaginary choice to several audiences in speeches, and the usual reaction is a guffaw, a chuckle, because the preference for Option A is so obvious.

To the farmers in rural China, Option A is not obvious at all.

Posted in Economics, Technology | 6 Comments »

Robots to the Rescue

Monday, August 19th, 2013

So, why is Japan obsessed with giant robots?

From War of the Worlds and The Day the Earth Stood Still to Independence Day and Battlestar Galactica, high-tech alien invaders have been a constant theme in American entertainment. But Japan actually grappled with such existential threats firsthand. Putting it another way, you could say Japan has been living in a science-fiction world since the day Perry first appeared.

The humiliation of realizing how far they’d fallen behind fueled a race to modernize. Within less than a century, Japan would manage to defeat a Western power at sea in the 1904–05 Russo-Japanese War and be defeated itself in 1945 by an unfathomably powerful new weapon in World War II. Success and failure, life and death, all of it riding on whoever possessed the better scientists and engineers.

Robots came to the literal rescue when Japan began rebuilding its shattered infrastructure in the late 1940s and early ’50s. Retooling what had been weapons factories into toy factories turned out to be a quick way to jump-start the economy. Tin robot toys, the earliest made out of cans discarded by the Occupation forces, represented some of Japan’s first exports abroad after the end of the war.

In fact, the toys are the real key to understanding Japan’s robot obsession. The great majority of classic robot characters from the 1970s and ’80s were the brainchildren of toy companies. Toy companies paid anime studios to create television shows, then paid TV stations for the airtime and the right to air advertisements during the shows. The first and most influential, “Mazinger Z,” debuted in 1972 to instant success.

This marketing gambit proved so profitable that dozens of companies leapt into the fray. (It’s actually illegal in the U.S., where the Federal Communications Commission specifically prohibits advertisers from airing ads for a show’s merchandise during the show itself.) By 1977, no fewer than 12 different giant-robot shows aired on Japanese TV every single week, glorious robot-on-robot action matched only by the glorious ads for the toys the shows were created to hawk in the first place. So far, more than 100 series featuring giant robots have been produced.

Posted in Economics, Media, Technology | No Comments »

Podcasts and the Violence Trap

Friday, August 16th, 2013

Our Slovenian guest recently asked me if I listen to any podcasts, and I do, but not consistently; my listening waxes and wanes.

The one podcast I’ve more or less kept up with is EconTalk. The most recent episode with Barry Weingast was rather dry but dealt with an important idea, that many nations are stuck in a violence trap: there is a surprising amount of violent regime change in modern times — and an unsurprisingly large amount in pre-modern times — and the threat of violence encourages leaders to create monopolies and other unproductive policies to pay off special interests that would otherwise threaten a coup or revolution.

(I also listen to Dan Carlin’s Hardcore History, The History of Rome, 12 Byzantine Rulers, and Norman Centuries.)

Posted in Economics, Policy, War | 5 Comments »

Donating Kaizen

Monday, August 5th, 2013

Instead of a check, Toyota offered New York City’s Food Bank kaizen — even though the charity wanted money more than expertise:

Toyota’s initial offer to the charity in 2011 was met with apprehension.

“They make cars; I run a kitchen,” said Daryl Foriest, director of distribution at the Food Bank’s pantry and soup kitchen in Harlem. “This won’t work.”

When Toyota insisted it would, Mr. Foriest presented the company with a challenge.

“The line of people waiting to eat is too long,” Mr. Foriest said. “Make the line shorter.”

Toyota’s engineers went to work. The kitchen, which can seat 50 people, typically opened for dinner at 4 p.m., and when all the chairs were filled, a line would form outside. Mr. Foriest would wait for enough space to open up to allow 10 people in. The average wait time could be up to an hour and a half.

Toyota made three changes. They eliminated the 10-at-a-time system, allowing diners to flow in one by one as soon as a chair was free. Next, a waiting area was set up inside where people lined up closer to where they would pick up food trays. Finally, an employee was assigned the sole duty of spotting empty seats so they could be filled quickly. The average wait time dropped to 18 minutes and more people were fed.

(Hat tip to Kevin Meyer.)

Posted in Business, Economics | 2 Comments »

Matches and Aluminum Pots

Monday, August 5th, 2013

When Napoleon Chagnon first arrived, the Yanomamö would make fire with a fire drill:

And when I was there for the first year of my field work life, maybe two years, every Yanomamö man had a little bamboo carrying case, a section of bamboo that’s hollow, and it would have extra arrow points, because if you shoot a certain kind of arrow it breaks every time, so you have to replace it, and you have to carry spares. And strapped to that bamboo point carrying case, the quiver, which is a piece of cord around the neck, there was always a chunk of soft wood that was cylindrical, with evidence that it had been used to light a fire, and they would, I mean that was their matches. And they could do it fairly quickly. When matches were introduced, those disappeared.

And when aluminum pots were introduced, their pottery disappeared. They made a pot that was about that high, narrow at the bottom, and it flared up on the sides, and they were so crudely fired that if they’d fall over they’d smash. So they carried them in pack baskets. They made these big baskets that the women harvested their produce in, bananas. When they moved from one place to another, they’d carefully pack this crudely fired clay pot in the basket, and then surround it with vine hammocks so it wouldn’t wiggle. And they took very good care of those.  When aluminum pans came in, they just stopped doing it. And for a while you could find chunks of the clay pots being used in their drug-taking, because the clay pot is a much nicer surface to grind their drugs on than an aluminum cooking pot.

Posted in Economics, Technology | No Comments »

Pension Bombs

Thursday, August 1st, 2013

With Detroit’s bankruptcy in the news, the Grumpy Economist looks at the unfunded promises of public sector pensions — or pension bombs:

Maybe it would clear things up if pensions had to report a “shortfall probability” or “value at risk” calculation like banks do. OK, you are assuming an 8% discount rate because you’re investing in stocks. What’s the chance that your investments will not be enough? Coincidentally, when I saw Josh’s piece I was putting together a problem set for my fall class that illustrates the issue well.

Here is the distribution of how much money you will have in 1, 5, 10, and 50 years if you invest in stocks at 6% mean return, 20% standard deviation of return. I added the mean in black, the median (50% of the time you earn more, 50% less) and the results of a 2% risk free investment in green. (The geometric mean return is 4% in this example.)

Pension Bomb Analysis per Rauh

The mean return looks pretty good. After 50 years, you get $20 for every dollar invested, or contrariwise an accountant discounting a promise to pay $20 of pensions in 50 years reports that the present value of the debt is only $1. But you can see that stock returns (these are just plots of lognormal distributions) are very skewed. The mean return reflects a small chance of a very large payoff.

In these graphs the chance of a shortfall is 54, 59, 62, and 76% respectively. As horizon increases, you are almost guaranteed not to make the projected (mean) return! The median returns — with 50% probability of shortfall, in red — are a good deal lower. And the modal “most likely” return is below the risk-free rate in each case.

Posted in Economics, Policy | No Comments »

Reynolds’ Law

Wednesday, July 31st, 2013

Philo of Alexandria dubs it Reynolds’ Law:

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

Posted in Economics, Policy | No Comments »

Comparing Vickies with Thetes

Monday, July 29th, 2013

Dave Ramsey shares 20 habits of the rich, including this one:

63% of wealthy parents make their children read 2 or more non-fiction books a month vs. 3% for poor.

Fifteen years ago, when Arnold Kling had a relocation web site, they acquired data on neighborhood socioeconomic characteristics, and the consumer purchase that most correlated with affluence was hardbound books.

By the way, Vickies are the neo-Victorians of Neal Stephenson’s near-future science-fiction novel, Diamond Age, and Thetes are the neo-Jersey Shore types.

Posted in Economics, Policy | 5 Comments »

Height through the millennia

Saturday, July 27th, 2013

In looking at height through the millennia, Jason Collins came across Robert Fogel’s work on American slaves:

Historians had long insisted that slavery was not only inhuman; it was bad business — hungry, brutalized workers made the poorest of farmers. Fogel and Engerman found nearly the opposite to be true: Southern plantations were almost thirty-five per cent more efficient than Northern farms, their analysis showed. Slavery was a cruel and inhuman system, but more so psychologically than physically: to get the most work from their slaves, planters fed and housed them nearly as well as free Northern farmers could feed and house themselves. …

Steckel decided to verify his mentor’s claims by looking at the slaves’ body measurements. He went through more than ten thousand slave manifests — shipboard records kept by traders in the colonies — until he had the heights of some fifty thousand slaves; then he averaged them out by age and sex. The results were startling: adult slaves, Steckel found, were nearly as tall as free whites, and three to five inches taller than the average Africans of the time.

The height study both redeemed and rebuked “Time on the Cross.” Although the adult slaves were clearly well fed, the children were extremely small and malnourished. (To eat, apparently, they had to be old enough to work.) But Fogel was more than willing to stand corrected.

Posted in Economics, Policy, Science | No Comments »

Mr. C and Mr. K

Thursday, July 25th, 2013

Arnold Kling imagines a conversation between Mr. C and Mr. K — a classical economist (C) and Keynesian economist (K):

K: See that man, Uri, sitting on the bench over there? He is involuntarily unemployed.

C: How do you know that? Do you know his reservation wage? That is, do you know the lowest wage that he would accept to go to work? Do you know what his best offer has been?

K: Yes. He won’t work for less than $12 and hour, and his best offer has been $11.50

C: So he is not really unemployed. He has withdrawn from the labor force, because he can’t find a job that will pay him what he wants.

K: No, according to the Department of Labor, as long as he is looking for work, he is unemployed. Besides, in his last job, he earned $14 an hour and what he produced was worth $15 an hour. But when the economy went into a slump, the demand at his firm fell, and he was laid off. His problem is that there is a lack of effective demand.

C: I’m not sure what ‘effective demand’ means, but ok. What should Uri be doing instead of sitting on the bench?

K: He could be digging a ditch for the government.

C: But he’d rather be sitting on the bench. Why should he dig the ditch?

K: The government can pay him to dig the ditch. They can pay him $12 an hour.

C: If his ditch-digging is worth $12 an hour, that’s fine. The taxpayers should be happy to pay Uri to dig a ditch if it’s a worthwhile use of his time.

K: Actually, the ditch is not worth so much. Let’s say his ditch-digging is worth only $5 an hour. But this way, he’s working instead of sitting on a bench, and as taxpayers we benefit from the ditch.

C: No! As taxpayers, we pay $12 and hour for ditch-digging that is worth only $5 to us. That makes us worse off.

K: Would you rather pay unemployment benefits of $8 an hour and get nothing?

C: No….But if we are going to redistribute income to Uri, why not encourage him to take the offer for $11.50 and pay him just $.50 an hour as a subsidy to do that?

K: Hmmm. Not such a bad idea. But the ditch-digging puts more spending into the economy.

C: No it doesn’t. You give $12 to Uri to spend, but that $12 comes from those of us who pay taxes, and now we have $12 less to spend. It’s just a transfer.

It continues.

Posted in Economics, Policy | No Comments »

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