Moral hazard

One of the nice things about living in a civilized society is being able share the risk of catastrophe across populations larger than your family and close friends.  We have all sorts of machinery for this, private and public, from welfare to fire insurance to fire departments, arrangements that protect each of us, for example, from either needing savings accounts large enough to pay for a whole new house (or a triple bypass heart operation) with cash, or being on the street, or dead, if chance rolls us snake eyes or boxcars.

Republicans are much exercised over the incentives to laziness and fecklessness these programs breed in poor people; as Oscar Wilde’s Lady Bracknell observed, if the lower classes don’t set us a good moral example, what’s the use of them?  Continue Reading…

Compared-to-what? analysis: Greg Mankiw edition

Is there anything more pathetically and transparently shoddy and dishonest than Greg Mankiw’s pretense at economics?

Why, yes there is: Greg Mankiw’s pretense at philosophy.

Isaac Chotiner reads Mankiw, so you don’t have to.

Extra bonus fallacy: Now that millions of people have Obamacare coverage, Mankiw’s “first-do-no-harm” approach would argue against repeal. Ditto social security privatization and reneging on public pensions.

What’s disgusting is that Mankiw can’t be, in real life, nearly stupid enough to believe the crap he publishes. If it’s not mere partisan hackery, it must be pure motivated cognition.

Stand with Paul Ryan!

I know many RBC readers dislike Paul Ryan, but when the man’s right, he’s right. The surest path to self-esteem is hard work, and people who have the opportunity to live on what other people have earned too often develop into lazy, worthless slobs.

That’s why I’m proud to support Ryan’s call for a 100% estate tax. How else can we teach teach the virtue of self-reliance to the idle sons of riches?

British and American economies: a rejoinder

Keith has turned off comments so I’ll reply to his thoughts on recent UK vs US economic performance by return of post.

If you want to compare the policies since 2008, the relevant data cover the whole period since 2008, not the last quarter of 2013 and an estimate for 2014.
Here’s the key chart, courtesy of Thomson Reuters:

It’s not a matter of debate but of fact that the British economy has underperformed the US one over the period by a substantial margin. The relative loss came to 6% of annual GDP by 2012, cumulatively around 15% of a year’s GDP. This contrasts with a slight British overperfomance previously (see the chart since 1999 on the same page), so the gap is very unlikely to have a structural explanation.

The Keynesian argument was and is that this shortfall represents a simple throwing away of at least $300 billion of potential work and output. That’s a rock-bottom minimum, as the benchmark US policy has hardly been aggressively Keynesian; for that you have to go to Australia or recent Japan. What has Britain gained from this? The bond vigilantes have been kept at bay; but then they have not appeared in either the USA or Japan, so the policy looks like elephant powder. The welfare state and local government have been trimmed, which the cynical suspect to have been the main point all along.

The austerian argument (made in good faith or not) has been that austerity forces neoliberal structural reforms that raise the long-term growth rate. So far, it’s a claim with singularly little evidence for it, far short of what would be needed to justify the widespread suffering the policy has directly caused. Germany has done better than the other eurozone countries, and had mild structural reforms in 2010. But Italy and France have suffered, and the Nordics prospered, without reforms; Spain, Greece, Ireland and Portugal have been forced to put on the hair-shirt, and Britain’s Coalition government freely chose one, in both cases to little benefit. The hair-shirt was made more bearable to élites by the fact that it was always to be worn conveniently by the poor, never by the financiers who triggered the crisis or the policymakers and pundits who enabled it.

You can trust The Economist on facts. Interpretation, not so much.

You cannot hope to bribe or twist,
Thank God, the British journalist.
But seeing what the man will do
Unbribed, there’s no occasion to.

(Humbert Wolfe)

Update: I see Kevin Drum beat me to it. But only my post has Humbert Wolfe.

A Surprising Comparison of U.S. and U.K. Economic Growth

The United States and the United Kingdom responded to the Great Recession in different ways. The U.S. passed an $800 billion stimulus bill whereas the U.K. in contrast kept government spending roughly flat in real terms. Some devotees of Keynesianism forecast that the U.S. would soar economically and the U.K. would descend into depression. Some supporters of austerity claimed that the reverse would happen, with the freespending U.S. going under the waves as Britain righted herself and steamed ahead.

The latest issue of The Economist provides recent economic growth data and 2014/2015 projections for both countries. Before you look at the table, make a guess as to which country has a booming economy and which one is mired in recession. Continue Reading…

Employment and freedom

Kevin Drum, who had the nerve to suggest that leaded gasoline that  was bad for people (as though that mattered next to the admirable and meritorious fortunes it made for GM, DuPont and Standard Oil!) has finally posted a graphic even I can understand.

However, Kevin completely misses what’s before his eyes. See, the Republican/American private sector jobs (red, of course) are going up while the Democrat/Socialist jobs are going down.  When something goes up while something else is going down, you don’t need a stinkin’ PhD to understand the situation: as any fool can see — I can see! — the government jobs we’re finally clearing out are not just parasites, but the jackbooted regulatory oppressors with their feet on the throats of our job creators! Teachers making kids do boring homework, librarians saying “shush!”, cops writing speeding tickets, weights and measures guys telling Safeway they can’t call 14 oz a pound if they want to, EPA busybodies telling entrepreneurs what they can and can’t dump in the river and the air, ATF thugs after my personal machine gun.

Fortunes are being made selling  bottled water in West Virginia right now because those proud, independent mountain people kept the government from messing with Freedom Industries.

Fire ‘em all and we’ll be rich.

Also, Benghazi.