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July 26, 2005

Economics in the Times.

An outbreak of economics in the Times:

The welfare policies pursued by successive governments in Britain and all around the Western world have the same effect. They transfer the economic cost of bad habits from the miscreants and their families to taxpayers. By reducing the cost of bad habits, these policies also reduce families’ incentive to resist them. This incentive, along with the cost, has been transferred to taxpayers. But since the cost is spread thinly, no individual taxpayer feels the incentive very strongly. And even if he did, there would be nothing he could do about it. Taxpayers cannot raise other people’s children.

Well done. The first and most basic thing in all of economics. Incentives matter.

For the advanced student, the other thing you need to know is TANSTAAFL. Most economic cock ups can be explained as an ignorance of these basic principles.

(For more on this, Glenn Whitman is your man).

July 26, 2005 in Media | Permalink

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Comments

Presumably this is why the sky has fallen in and Western civilisation has collapsed.

Posted by: dsquared | Jul 26, 2005 9:41:23 AM

And why Sweden is such a hell-hole.

"The welfare policies pursued by successive governments in Britain and all around the Western world have the same effect."

Yeah, less children growing up in poverty. Which means less ill-health, better educational outcomes and less crime.

"The first and most basic thing in all of economics. Incentives matter."

That's pretty basic alright. Here's a second principle which supercedes that one: Incentives are not all that matter.

Posted by: Jim | Jul 26, 2005 10:55:47 AM

The welfare states policy of rewarding irresponsibility by punishing responsible financially succesful inexorably leads to benefit addiction for the irresponsible and lower living standards for the responsible.

The worst aspect of this is that these tax slaves see their time extorted from them to harm them!

Incentives matter. That's why so many of the UKs best are emigrating!

Posted by: Rob Read | Jul 26, 2005 11:59:08 AM

Why are you still here Rob?

Posted by: N.I.B. | Jul 26, 2005 1:34:01 PM

Sorry for the posting above. It would be nice if you could WIKI your own posts.

N.I.B.

I'm just finishing rental contracts and finalising deals in the UK. Hopefully not long now. Jan/Feb!

I may even set up a blog like TimW has, to describe the UK evacuation process.

Posted by: Rob Read | Jul 26, 2005 3:04:51 PM

So - welfare policies transfer (socialise) the costs of "bad habits" and so reduce people incentives to tackle these "bad habits"?

Well - health is presumably a welfare policy - the cost is certainly socialised. Too bad that people have the bad habit of getting ill and old. Let's go for a nice market driven + private insurance system. We knows that this market based based system is cost effective in the US....

State financing of basic educational needs? Another nonsense - where did the oiks get the idea that the taxpayer should pay for it. Encourages them to read too much and get ideas above their station. In the good old days we sent the kids up the chimneys and they were grateful for having a job.

State financing of social housing? A nonsence - we have to wean people off the bad habit of having income too low to afford decent housing. Throw them out into the streets - a short sharp shock never hurt anyone. Make the buggers work for a living. And bring back MITR to reward the honest home owner.

Now... ... to be serious.... of course incentives matter in the design of welfare policy. But not just incentives. And sometimes they don't matter too much.
It takes a genuine blithering idiot to believe that illness, poverty and other social problems are best described as the result of "bad habits".

Posted by: rjw | Jul 26, 2005 5:03:29 PM

rjw,

It takes an even bigger idiot to beleave that the people who have nothing to do with the problem should be footing the bill.

but then collectivists are completely immoral fools.

Posted by: Rob Read | Jul 26, 2005 9:35:22 PM

My word, you're right.

I'm going to cancel my home insurance first thing tomorrow, because I'm certainly not a burglar or an arsonist!

Posted by: N.I.B. | Jul 26, 2005 10:28:22 PM

While you're canceling your home insurance you couldn't ring up on my behalf and cancel my unemployment benefit entitlement, membership of the state ponzi pension scheme, NHS membership, NI contributions, schooling bill and council tax? I already pay/paid for all these services privately and I don't want to trouble the government with the burden of collecting money off me for things I know I don't need.

Of course the best insurance against burglary and arson is seperating burglars and arsonists from the rest of civilised society. By refusing to jail criminals the left has made the whole country an open prison.

Posted by: Rob Read | Jul 27, 2005 3:05:39 PM

Sure thing! But while I'm on the phone, do you mind if I ask after getting you a sense of humour replacement? I think you're probably entitled.

Posted by: N.I.B. | Jul 27, 2005 7:40:00 PM