Here’s another draft excerpt from my book in progress, Economics in Two Lessons. To recap, the idea of the book is to begin with the idea that market prices represent opportunity costs for the households and business who face them (Lesson 1), and then go on to explain why market prices won’t in general equal opportunity costs for society as whole (Lesson 2). A lot of the book will be applications of the two lessons, and this section is an application of Lesson 1.
As before, all kinds of comment and criticism, from editorial points to critiques of the entire strategy are welcome.
To help poor people, give them money
The problem of poverty is huge, in rich and poor countries alike. Around the world, nearly a billion people live in extreme poverty, living on less than $US1.50 a day. Even in the United States, on many measures the wealthiest country in the world, the Dept of Agriculture estimates that 14.5 per cent of the population experience food insecurity, defined as being ‘uncertain of having, or unable to acquire, enough food to meet the needs of all their members because they had insufficient money or other resources for food.’
Faced with images of the hunger and suffering caused by famines and extreme poverty, a natural and intuitive reaction is to send food. This reaction is often politically appealing in countries that happen to have large stockpiles of food, either because of unforeseen declines in market demand, or because of government policies such as price supports for farmers.
On the other hand, many advocates of development aid dismiss food aid as a short-term ‘band-aid’, and argue that the aim of aid should be to provide the ‘right’ kind of assistance, as measured by subsequent economic growth. Advocates of aid initially focused on economic infrastructure and industrial development, and have more recently turned their attention to health and education.
Similar debates have played out in the United States. The Supplemental Nutrition Assistance Program (SNAP), better known as food stamps, has played a central role in US programs to assist low-income households since it was introduced in 1964. With cuts in other welfare programs, its importance has increased over time.
On the other hand, as with international food aid, the SNAP program is regularly derided as a bandaid approach. Liberals frequently point to education as the way to provide real opportunities for the poor.
Which of these approaches is right? Much of the time, neither. While support for health and education has a better track record than food aid, there is a growing body of evidence to say that, in both poor countries and rich ones, the best way to help people is to give them money.
To see why this should be so, ask: What would a desperately poor family do with some extra money? They might use to stave off immediate disaster, buying urgently needed food or medical attention for sick children. On they other hand, they could put the towards school fees for the children, or save up a piece of capital like a sewing machine or mobile phone that would increase the family’s earning power.
So, the poor family is faced with the reality of opportunity cost. Improved living standards in the future come at the cost of present suffering, perhaps even starvation and death. Whether or not their judgements are the same as we would make, they are in the best possible position to make them.
This is a straightforward application of Lesson 1. Market prices reflect (and determine) the opportunity costs faced by consumers and producers.
Exactly the same points apply in rich countries. Giving poor people assistance in kind, such as food stamps and subsidized housing, has a lot of political appeal. Not only does it meet an apparent need, but it appears to reduce the chance that the recipients will waste their extra income on luxuries, or on alcohol and tobacco. In addition, as in the case of the US food stamps program, it may also be possible to form a political coalition with producer interests, represented by the farm lobby.
Thinking in terms of opportunity cost, however, we can see that aid in kind almost inevitably results in waste. The opportunity cost of subsidized housing is the low rent paid for the house, while the opportunity cost of moving usually includes going to the back of the line. So having secured subsidized housing, people will stay there even if the house no longer suits their needs, because it is too big, too small, or too far away from a new job.
The same kinds of problems come up with food stamps. Families poor enough to get food stamps face all kinds of problems. They might, for example, need urgent medical or dental care, or be faced with eviction if they don’t make a rent payment.
Most of the time food stamps cover only part of a family’s food budget, so they are really just like cash. Families can meet some of their food bills with stamps, then use the money they save to meet other needs The opportunity cost of spending more on food is the alternative that can’t be afforded.
But it’s precisely when people need money most, to the point where they are prepared to live on a restricted diet, that the limits of food stamps start to bite. If poor families were given money, they could choose to pay the rent bill even if it meant living on rice and beans. That’s a hard choice, but it might be the best one available.
Unsurprisingly, then, poor people often try to change some of their food stamps for money. This is denounced as ‘fraud’ and used as a reason for cutting food stamps even further.
It is market prices that determine the opportunity costs of goods and services for individuals and families. So, when people choose how to spend additional money, the opportunity cost of one choice is the alternative that could be bought for the same amount.
The idea that poor people don’t understand this is patronizing and wrong. The tighter are the constraints on your budget, the more important it is to pay attention to them. Poor people often have less access to markets of all kinds, including supermarkets basic financial markets such as bank accounts and face complex and variable prices as a result. Nevertheless, many of them manage to find highly creative ways of stretching a limited budget to meet their needs. Additional constraints, in the form of payments that can only be spent in particular places and on particular goods, are the last thing they need.
These arguments have been going on for many years, but resolving them has proved difficult, since there are usually many different factors that determine good or bad outcomes for poor families. In recent years, however, a combination of improved statistical techniques and careful studies of experimental program pilots have allowed an assessment of the evidence to emerge. Overwhelmingly, it supports the view that giving people money is more effective than most, if not all, forms of tied assistance in improving wellbeing and life outcomes.
http://www.thebaffler.com/blog/blaming-parents/
If the best way to help the poor is to give them money, what is the best way of doing that? In a market economy there are two possible answers. The one that has been discussed most is redistribution; that is, using the taxation and welfare systems to transfer some market income from the rich to the poor. More difficult, but arguably more effective is to change the structure of markets and property rights to produce a less unequal distribution of market income — this is sometimes called ‘predistribution’. We will come back to this issue later.
John Quiggin 
A related point is made by Steven Pudney in his book “Modelling Individual Choice: The econometrics of corners, kinks and holes” where he calculates the budget constraint for a low income person in the UK – he comments how complex it is with lots of kinks and gaps (nothing like even the more complicated ones in a micro class) saying it took him quite a bit of time using a spreadsheet. He said something like it was a bit of a sobering experience to do so.
As Ikonoclast often points out, there is not one solution that cures all problems and satisfy all needs. The best optuon would ba to use two prong approach, market pricing policy for labor and basic income guarantee. Or using MMT terminology: basic income gurantee suplemented by guaranty to work. Not one program im.plementation can do the change that you propose. Only together, BIG and GW can sufficientla force the market to provide pricing for trully free actionable options for poor and near poor. This alao provides the demand to firms to sell and invest more.
Opportunity cost of creating more poor people is lack of demand to firms’production and investment. This is how secular stagnation is created.
Another policy that could help poor a lot is to reverse credit scoring system. Presently poor pay considerably higher interet rates for loans then rich due to unjust credit scoring. This is another reason that over time near poor become poor, overcharging them for emergency loans. Payday loans are allowed to charge up to 700% rate and then allowed to sit on SS income of many pensioners. But nominally, biggest burden on near poor is through housing loans with low credit scoring putting higher burden on poorer then on rich for housing loans.
Poor also need psycological education, not only counseling because dealing with so many calculations of opportznity costs drives stress and deppression affecting cooperation within famillies which almost guarantees a perpetual poorness. Yes, due to economic environment, poor are driven to constant anger and familly destruction, antisocial behaviour that also keeps them poor.
* From an Australian author, some discussion of Australia’s history of Income management in its various forms – imposed by Government, imposed by community/government (Cape York Welfare Reform), or voluntary (Kimberley) would be well placed here. Particularly the argument advanced (and re-advanced by Forrest) that income management or quarantining is justified because addictive substances or behaviours (e.g. alcohol, drugs, gambling) or social obligations (kin-sharing, “humbugging”) will distort people’s choices.
* More generally, among those who agree that cash transfers are better than food, there is an ongoing argument between advocates of conditional cash transfers (e.g. you get cash if you immunize your kids) or unconditional cash transfers (just give money without strings). There are studies arguing either way. Particularly important here is the gender dimension of who in a household controls the spending of the money – no strings cash is easier for men to squander, cash attached to children’s welfare measures tends to be more controlled by women within the household.
* Another argument advanced against “just give money” that isn’t addressed here is that although it may be better for welfare in the short term, cash transfers provide a disincentive to seek work. There is a good study of Brazil’s Bolsa Familia Conditional Cash Transfer program, “Evaluating the Impact of Brazil’s Bolsa Família: Cash Transfer Programmes in Comparative Perspective” by Fábio Veras Soares, Rafael Perez Ribas, and Rafael Guerreiro Osorio of the International Poverty Centre, which showed that labour market participation actually increased by 3-5% among recipients. They don’t speculate as to why, but some reasons suggested by others include that better income security enables better planning by families to take up opportunities, or to gain the prerequisites of finding a job (e.g. a mobile phone, some good clothes to wear to work, etc). As receiving Bolsa Familia depends on school attendance, it could also be that children are being withdrawn from the labour force to go to school, and then their parents are entering the labour force to make up the lost income from child labour.
Money prices (even when they aren’t market prices) are definitional of opportunity costs when people are deciding how to spend money. The opportunity cost of whatever you spend a dollar on is whatever else you could have bought for a dollar (and this is still true for dollars spent, for example, on tickets for a public transport monopoly, where the prices aren’t market prices).
But money prices don’t define opportunity costs when people are making other kinds of decisions, like what use to make of their own non-monetary resources, including their own time and effort.
Or have I missed something here?
Beep. No, they don’t. Even with the most extreme discrepancy in purchasing power parity, that’s a physical impossibility.
What is in fact the case, and which illuminates what is going on much better, is that many very poor people still have some non-cash subsistence resources for which their small cash incomes are a barely adequate top up.
This insight should show that, when money from outside sources is given instead of food from outside sources but there is no way that money from outside sources can command food from outside sources, it is simply pointless as it can only move food from mouth to mouth. Now, that is a rare case, and giving money to people in Africa doesn’t present that problem; but it does in North Korea.
J-D
Market prices do not have anything to do with people’s decision on how to spend money. People decide quantity produced, not the price except for something like iphone where monopoly pleys.
Again, buying choices determine quantity produced not prices, at least not in very short term.
Industrial policy determines prices, buying choices determibe quantity.
Prices are determined by governments decision to spend into such sector raising incomes in that sector and lowering production cost at the same time.
Again, use MV=QP. M determines Q and V (determined by income levels) decides on Q also. That is how it is between sectors of an economy and between any sectoral ballance.
How much money will flow from one sector to other is pulled by initial government investment into a sector.
Using competition that produces declining rate of profit a price will quickly setlle no matter buying choices except in monopoly being present and bbuying choices determine only the quantity in medium and long term. So, MV always determine only quantity while incomes determine V and quantity with it.
This is how high social safety net and good incomes over time created developed world and unprecedented prosperity growth in post WWII with New Deal policies. There was no Secular stagnation with rising income that grows quantity and prices only as a sideeffect.
1. The paragraph that begins:
has some wrong/missing words.
2. What about the Utah solution to chronic homelessness: Give them a house to live in – no strings attached, no subsidy – just a safe place to live for free? In Utah they have been doing this for a decade and the results appear positive. There is lots of stuff about that program on the net but here is just one story:
JQ, let us extend that thought. To help poor people give them money via government jobs. All that is needed is a Government Job Guarantee. If you crunch the numbers you will find a Job Guarantee is easily fundable.
The Job Guarantee will pick up anyone who wants a full-time minimum wage and cannot get it from private enterprise. Clearly, it would require a rolling implementation but when fully running it could soak up all able-bodied / able-minded unemployed that private enterprise would not employ. It would amount to reserve employment at the minimum wage. There would still be proper requirements on participants just as any employer puts requirements on their workers. People who could not or would not meet those requirements would be able to stay on benefit instead.
Standard minimum wage currently = approx. $34,000 p.a.
Current unemployed = 750,000 (estimated)
Raw Cost = $25.5 Billion p.a.
Taxes recouped = $2,000 per person. (estimated)
Taxes recouped total = $ 1.5 billion approx.
Benefits saved = $ 9.0 billion approx.
Net Cost of J.G. = $15 billion p.a.
Cost of negative gearing to budget = $5 billion p.a. (phase it out)
Cost of fossil fuel subsidies = $5 billion p.a. (phase them out)
Future fund revenue p.a. = $12.7 billion so take $5 billion from this.
Easy peasy, JG paid for.
I’m a big fan of the “give them money without strings attached”. If you look at Centrelink, there are hoops to jump through, but inevitably you end up with money if you need it. But jumping through those hoops is hell. And it stops you thinking about what might actually make you happy and allow you to contribute to the economy.
Galbraith pointed out that the rich are pretty universal in their belief that money is bad for the poor. But strangely enough, it does not have such a harmful effect on the rich.
@Ikonoclast
Rather than a guaranteed government job, I’d just have a base income of around $12,000 per year for everyone in Australia. OK, less for children. But you’d get it if you were poor or Gina.
Adjust tax rates to balance the budget. And shut down Centrelink.
Ikonoclast,
“JQ, let us extend that thought. To help poor people give them money via government jobs. All that is needed is a Government Job Guarantee. If you crunch the numbers you will find a Job Guarantee is easily fundable.”
There was a review by Thomas Piketty in the New York Review of Books this week of the recent book “Inequality: What Can Be Done?” by Anthony B. Atkinson, where the author proposes guaranteed government jobs for people, along with other policies to reduce inequality:
“The legendarily cautious English scholar reveals a more human side, plunges into controversy, and sets forth a list of concrete, innovative, and persuasive proposals meant to show that alternatives still exist, that the battle for social progress and equality must reclaim its legitimacy, here and now. He proposes universal family benefits financed by a return to progressive taxation—together, they are intended to reduce British inequality and poverty from American levels to European ones.
He also argues for guaranteed public-sector jobs at a minimum wage for the unemployed, and democratization of access to property ownership via an innovative national savings system, with guaranteed returns for the depositors. There will be inheritance for all, achieved by a capital endowment at age eighteen, financed by a more robust estate tax; an end to the English poll tax—a flat-rate tax for local governments—and the effective abandonment of Thatcherism. The effect is exhilarating. Witty, elegant, profound, this book should be read: it brings us the finest blend of what political economy and British progressivism have to offer.”
http://www.nybooks.com/articles/archives/2015/jun/25/practical-vision-more-equal-society/
@Jordan from Croatia
I think I must have failed to make my point clear to you.
You seem to think I was suggesting that people’s buying decisions control what prices will be. That’s not what I wrote and it’s not what I meant.
You seem to be discussing how prices are determined. I was saying nothing whatever on that subject, so whatever you are saying about it is unrelated to the point I was actually making.
This project will flounder if there is not a clear concept of what opportunity costs are, in theory and in practice. Lesson 1.
From previous threads, this is still a mess.
A good start would be to make it clear (if you are clear) that, economically, opportunity costs only apply to market commodities.
This means that your judgement of different benefits then, is based only on your endowments and budget before and after a trade.
You will avoid a lot of confusion.
Maybe opportunity costs are useful – I doubt it, but if a good tight argument was presented maybe more people would agree?
@John Brookes
No, it must be a job producing goods and services for the community.
P.M.Lawrence :
No, it is a fact.
Recent World Bank data estimates the number of people living on under $1.25 a day at about 1.4 billion worldwide [see: Link ]
@Ivor
Absolutely, jobs provide people with self-respect and a way of being part of the community.
It is social capital that poor people lack and some good reasons why they would want to be part of this economy in which ‘leaners’ start so far behind the 8 ball that it’s a mugs game to even consider competing.
“Poor people often have less access to markets of all kinds” e.g. to use Uber (which really is cheaper and better than Taxis, and has just cut their prices 10%) you need to have a smart phone with a data plan.
@J-D
I am on the same page as you @4.
That seems a bit of a reach. Why isn’t the government, the church or UQ School of Economics in the best position to make that judgement? (The answer strikes me as obvious – because they don’t know as much about the situation as the people who are in it – but still with briefly making explicit)
The opportunity cost (to the occupant?) of subsidised housing is the cost of the next best option foregone, which strikes me as paying full rent, no? The cost to the occupant is the low rent paid.
@Robertito
Never mind, I’m confusing the government decision with the individual’s decision. The opportunity cost of my rental house is the rent I pay, as I could spend that on something else. It’s the same for subsidised housing, but the rent is lower. The opportunity cost is the benefit of the next best option, not the cost of the next best option.
Did you even read any further than the part of what I wrote that you quoted?
No, those figures do not support that, they have been misrepresented as supporting that (including, misdescribed as that by sloppy and incorrect use of “living on” to cover those people in the various reports). They actually support the point I made – that there are many people living with that income, not on that income. The mere fact that they have that income and that they are living does not mean that they are living on it, any more than a small boy lives on his pocket money; that is an unwarranted misinterpretation of the data. Those poor people manage to survive by combining that income with non-cash subsistence resources, e.g. scavenging for wood or animal dung for fuel, begging for food that would otherwise be thrown out, maybe even having a tiny remaining plot of land they can work as a vegetable garden, and so on (if you had looked into that link that you mistook as supporting your position, you would have found “… though in some areas a large proportion of poor households own small plots of land … Common occupations were … small-plot agriculture …”). Of course, some others don’t manage to survive like that and are replaced by new poor people when those fall off the ladder, but that is even less reason to count them as living on under $1.25 per day.
Among misplaced forms of aid in kind, the worst is subsidised fuel. Contrast subsidised public transport.
As a possible exception to the cash rule, consider communications. Access to mobile phones and the Internet enables many other things and widens, rather than narrows, the options of the poor. Go-ahead public employment agencies in Denmark and the Netherlands will I believe supply basic mobile phones to indigent jobseekers, as without them they cannot today fond work.
Many poor Africans are in fact ready to spend a high proportion of their income on mobile phone access, supplied unsubsidized by enterprising and hardy phone companies, two of them based in South Africa and Egypt. (I counted three mobile phone companies offering service in the war-torn Eastern provinces of the Congo; there are even more in Somalia.) The Internet lags behind. It is possible that pump-priming Internet cabling in favelas would pay off handsomely. One of the big downsides to the pacification of favelas in Rio de Janeiro was that the inhabitants instantly lost access to the extensive pirate cable networks, and now have to pay much more to legitimate operators.
The other argument for conditional aid is justice for girls. The Bolsa Familia in Brazil has few conditions, but they include child vaccinations and sending girls to school. This is surely fair.
Payments in kind make sense in the very short run when local supplies are inelastic – for example immediately after a natural disaster. I think a reason argument for in kind transfers is based on sympathy for the preferences of the giver. If someone is taxed to support a poor person them the preferences of the rich person for not having the money spent on pokies or booze matter – even if there is an inefficiency cost. Also certainly the household structure issues mentioned – e.g. kids not making schooling decisions – are important.
Having made all these arguments for in kind transfers I have to say that in most situations monetary transfers make much greater sense.
@hc
I find this a very weird way of thinking about taxation and what it is for.
“If someone is taxed to support a poor person”
Seriously? Is that the way you think?
The tax you pay is ‘your’ money and you get to resent the fact that ‘the poors’ might choose to spend that money on a legal drug and gambling and thereby possibly find some relief from their depression, anxiety, physical health problems that have been caused by the economy they have been forced to live in by the rich and the aspirationals?
And of course the entrepreneurs who provide gambling and alcohol to the poors are so upset that ‘these people’ are spending all their taxpayers money on a way to forget that they are ‘leaners’.
And so obvious to you that the ‘rich’ person gets to force their preferences on the ‘poor’ person?
oh dear I have said something that sent my comment to hc into moderation.
@hc
The best argument for in-kind I’ve come across is that booze, drugs etc distort decision making and so those who have substance problems will blow the money. In a bitter twist, poverty itself also distorts decision making (http://www.sciencemag.org/content/341/6149/976), which could be taken as evidence for either side I suppose.
Julie,
I think the provider of funds to the poor is entitled to exert some weight on the way it is spent, yes. The person providing the funds is giving something up. Partly they can express their preferences through the ballot box on the level of redistributions that are reasonable. But they will be much happier if they know the monies provided are spent on education of children or good food for kids rather than the pokies or junk food. If you weight people’s utilities in an additive fashion then yes it makes sense to weigh these gains to the giver.
I agree with Neville too that booze and drugs do distort decisions. Poverty too is often associated with a lack of skills. Some of these missing skills relate to budgeting.
J-D
I can see now that your post at #4 is about something else then i originally tought. I appologise for not seing that your post is about: people with limited income have to choose what they spend money on. Dooooughhhh
Only good use of opportunity cost is in deciding public policy. If it is about individual choices it invites authoritarian arguments that somene else should be choosing for individuals. Individuals are allready well aware of their opportunity cost they encounter. At least most of them except drug and alcoholic abusers, somwhat food abusers too.
hc
When did people who pay tax start to believe that they were providing funds for the poor rather than contribution to the greater good? I don’t really think they are much happier to know that ‘their’ tax is being spent on the deserving poor. Those people have been manipulated to feel resentment by all the nasty ideas of individualism and rampant capitalism.
I’d say the psych research shows that they would be happier if they had less stuff and more community in their lives.
Are you old enough to remember when welfare was rightly called social security and tax was just the price good people who took responsibility for themselves paid for the benefits that come from living in an egalitarian society where there were no poor and desperate people?
There was a time when there was a job for everyone who wanted one. There was no need for welfare and people who did not budget well may have been called names but they did not have to endure the sort of attitude that you have. It is also the case that this attitude creates more dysfunction and less of a willingness to budget properly.
There was a time in my country when the ladder climbers and aspirationals were derided as money grubbers and social climbers. Before the transition to neo-liberalism and an economy that seems to be the right wing idea of a society, people lived in extended families and communities, children didn’t have to leave home to find work and brothers and sisters did not become estranged because some climbed the ladder successfully and others didn’t.
People looked after each other. The old people tell me this, that in this town whole families used to come and work on the community hall on weekends for nothing, for no pay, just the fun of building something that would be good for everyone.
How did people like you take over my country and turn it into a place where those who have the skills to take advantage of others, do that and then resent the fact that they need to share some of their wealth with those others who didn’t have those skills?
With respect to the change in people’s decision making when destitute, as opposed to financially stable, I have the odd thought (or think oddly, not sure).
The distortion could be a change in a person’s perception of risk against time, in the sense that a slight change in the environment can make it impossible for them to accomplish something, because their options are so constrained in the first place. They focus on the present much more so than those who have some spare cash and a job, they focus on getting some enjoyment out of the immediate future, and not out of some unknowable distant future. The ol’ do it today because I could be dead tomorrow logic applies.
Or, perhaps the change is a reaction to a circumstance all animals can confront: a lack of sufficient food to sustain them adequately, i.e. energy-poverty. In this case, my guess is that the reason the distortion in decision making looks bad to those of us (not in dire straits) is because we evolved from social animals but became people operating in an economy which sprung up inside a few thousand years, a mere blip in the history of humanity. To be impoverished pre-civilisation was to be energy-impoverished, i.e. lacking the minimum necessary food to get by: it is quite reasonable for the body’s organs, especially including the brain, to retreat to minimum necessary functions, as a response to energy shortage. The brain in full flight consumes 20% or so of our basal metabolic rate, so cutting back on the pre-frontal cortical functions and relying on the more instinctive cognitive functions would shave off some of that energy demand. I wonder if any scientists have looked at changes to other organs and their energy consumption in people who are destitute? Perhaps it isn’t just the brain which goes into a (conjectured by me) low-energy mode? Furthermore, this could be a partial explanation as to why we are more tempted by sweets and fatty foods, fast foods, when we are destitute: it isn’t just about the cheapness, it is about the high caloric density of junk foods compared to healthier alternatives. Each day of poverty (in a free market society) is one in which we unconsciously seek the high caloric density food over the healthier alternative. Just a hypothesis…
@Donald Oats
Being poor totally negates any rational cost benefit analysis that even a very high iq economist could make. Budgeting failures is just so not the problem for the poor who ‘fail to pull themselves up by their bootstraps’ like the better people do.
The problem is that the mean spirited welfare provided with the attitude that hc epitomises does not provide the ‘linen shirt’ that provides people with self-respect.
The problem is that the choice poor people have to make when ‘budgeting’ is between things like giving the kids something important now – eg a school excursion – or taking out insurance for the future. The latter would be the most rational choice – given the assumptions that rational economists make about life and human nature – but has no immediate benefit for the family.
So some people reason that it is a better choice to choose to look after their child now and take a chance that they will be lucky in the future and the house won’t burn down.
If we did live in an egalitarian society in which each child received the same support and equal access to all the benefits that the rich provide to their children, we would see that we do not live in a meritocracy and that those who imagine they are where they are because they are smarter and work harder would be revealed as not the deserving rich.
I don’t think we need to go back to our hunter-gatherer origins to see that we can create egalitarian societies or at least more egalitarian societies; as far as I can see the old people I meet out here still live in the ’60’s society that has gone and the poor suckers don’t understand that they have voted to change that way of life.
@Julie Thomas
It’s interesting that many “complex system” economists would agree with you, from Marx to Keynes to Krugman to Stiglitz. On the contemporary Australia scene, Bill Mitchell, Ernestine Gross and Steve Keen would all agree with you.
This list of economists is very disparate in political economy terms and even in technical views. The one thing however that they do have in common is that they are essentially system thinkers. Their work (in my opinion) explicitly or implicitly acknowledges that there is a complex system involved and that some outcomes are therefore systemic and systemically conditioned.
This is in contrast to crude and neoconservative thinkers who essentially deny there is a system (“there is no such thing as society”), who deny there are other possibilities (TINA – There Is No Alternative) and who simplify everything down to personal agency. What they imply is there are no greater forces, there are no accidents, no contingencies, no luck, no history, no inheritance of goods and ills. I wonder if they have ever considered the contradiction in claiming that all individuals have multiple and fair choices in a structured, hierarchical and inherited-fate system to which there is no alternative?
@P.M.Lawrence
This makes no sense.
What is your point?
@Ikonoclast
My honours thesis was a project in which we looked at an example of human movement and attempted to describe this movement and the way it changed under conditions in which the timing of the task was varied, using Dynamical Systems Theory. We even found evidence of a phase transition.
I don’t remember much at the moment about the specifics of the study we did; it was in 1994 but I do remember that the idea of this way of understanding behaviour made a lot of sense as soon as I began to read about the topic.
I had never heard of Dynamics or non-linearity before I was asked by the new Professor who came to our regional uni to be his student. At the time a standard leftie psychologist who wanted to work with the moochers and help them to learn to budget properly.
My prof came during the Dawkins years when there was so much money for the institutions that were supposed to compete with the sandstones and do research and he was not all that impressed with the new ideas that involved ‘dynamics’, having done most of his research work using information processing theories which require the existence of mechanisms and causality to explain how coordinated intentional behaviour comes about.
Happily the prof also brought post-docs who were very good with theory and the maths. I had to do a lot of work to pick up enough maths including sitting in on the dynamics lectures given by the other international researcher who came to our uni and was working in climate dynamics.
Anyway, I really liked the ideas and there are people working in all sorts of academic disciplines who are also interested in this way of understanding ourselves and our universe but I have no recent knowledge of what is happening in the area.
There seem to be a number of recent papers available to read if you google economics and dynamical systems theory.
Sure, by all means give poor people money. Charity is a good thing. Just don’t steal it off the “rich” to give to the “poor”. Over time, as history and evolutionary psychology/biology shows, forced redistribution just results in populations who can’t compete and take little action except to commit crime and get more free stuff doled out by some ruling elite. These are the lessons of Socialism. Lets not ignore them. Want another Greece?…an Argentina?…a Cuba?….A North Korea?
@rational liberal
You don’t know as much about history as you think you do; nor as much as you think you do about biology/psychology, either.
@J-D
We can agree on that J-D. I always like to note when I agree with persons, especially when I have disagreed with them on other matters in the past. It is always useful and solidarity inducing to find areas of agreement.
J-D
I’m not here to trade schoolyard insults. I’ll leave that to those who rarely seem to rise above personal abuse and character assassination as debating tactics. You have no idea who I am, what experiences I and my family have been through, nor what I have formally studied. If you want to rebut my points, go ahead. I’m open to learning. Otherwise, stop wasting everyone’s time.
@rational liberal
Just one question though – how do you explain the top marginal tax rates in the US from the early 40s through to the early 60s that appeared to coincide with the evolution of the superpower they are today?
@rational liberal
What points have you made? You have stated that you agree that poor people should be given money but why is this? What is your argument here? Let’s see how rational it is.
Then you say Charity is a good thing but you haven’t provided any rational argument for this statement. What are your premises?
We can start there to decide what you know but I think it is quite clear that you are lacking in a whole lot of knowledge about all the things you apparently ‘know’.
@rational liberal
and if you are not here to trade schoolyard insults what are you here for?
Ikonoclast,
Are you agreeing with J-D’s attempt (unsuccessful) to belittle me without any supporting evidence or rationale, or are you just someone who avoids conflict and constructive competition at every turn, preferring the deluded comfort of agreeableness instead?
@Troy Prideaux
Thanks for the question Troy….I’ll give an answer a go…..I’m no economist, but I would guess there were other forces at play such as trade freedom, the rise of incorporation as a vehicle for doing business and the need for the early baby boomers to work hard (despite heavy taxes) to raise their new born kids that mitigated the high marginal tax rates and supported the boom. I feel though, you may already have an answer for me. If yes, I’d love to hear it. It does seem like a contradiction.
@Julie Thomas
Is the government representing the community. Not the tax payer: once you’ve paid the money you hand over passes beyond your control. That’s what “payment” means.
@Julie Thomas
Hi Julie,
Thanks for your questions. I’m here to learn, like I said. There’s a lot of people much smarter than me here. To your questions;
Poor desperate people do desperate things like resort to crime to live. Voluntary charity alleviates this problem. Continued entitlement leads to the problems I’ve mentioned though.
Please, just because I used the moniker “rational liberal” does not imply I feel everyone else here is irrational.
Please also, can we just chill with the immediate attempts to put yourself in a superior judging position over me. It just locks you into an emotional set against me and prevents you from really reading and considering what I write. This is why you asked me what I am here for, when plain as day I said it in my post.
Thanks for taking the time to respond.
Please, just because I used the moniker “rational liberal”
Julie,
One more thing. I would consider for someone to NOT be voluntarily charitable to be a profoundly cowardly posture to take. The opposite for charity by force – it’s not at all brave to advocate the taking of others money by force, without doing it yourself and inviting the risk of being hurt for your troubles.
@rational liberal
The problem with voluntary charity is that there’s a tendency to only target the deserving poor. A guaranteed income, enabling the recipient to live in decent comfort, should be provided to all by the government, paid out of the receipts of a progressive tax system.
I don’t believe in communism – in legislated common property. But i do believe in redistributions to help the very poor to an economic level that enables them to live a frugal though decent life. I strongly agree with “rational liberal” that taking money by force from one person and giving it to another (the tax-transfer mechanism) does infringe on individual liberties. Still I favour doing it though with care. The redistribution should be just enough so that (in T. Scanlon’s contractualist terms) poor people could not “reasonably” reject it as unfair.
@rational liberal
I am confident that you cannot adequately substantiate your assertions by reference to history and/or biology/psychology, and that is the basis on which I assert that you don’t know as much about those subjects as you think you do.
If you can supply a basis for your conclusions (from history, biology/psychology, or anything else) you are free to do so. If you don’t, I shall abide by mine. I’m not going to attempt to present a rebuttal when there’s been no attempt at making the affirmative case stand up.
@rational liberal
LOL.