Vox Millennials
12 Jul 2014 1 Comment
in economics, politics - USA, Public Choice Tags: Millennials, public opinion
- 73 percent of millennials favor allowing private accounts for Social Security; 51 percent favor private accounts even it means cutting Social Security benefits for current and future retirees because 53 percent of millennials say Social Security is unlikely to exist when they retire
- 64 percent of millennials say cutting government spending by 5 percent would help the economy
- 59 percent say cutting taxes would help the economy
- 57 percent prefer a smaller government providing fewer services with low taxes, while 41 percent prefer a larger government providing more services with high taxes
- 57 percent want a society where wealth is distributed according to achievement
- 55 percent say reducing regulations would help the economy
- 53 percent say reducing the size of government would help the economy
- 74 percent of millennials say government has a responsibility to guarantee every citizen has a place to sleep and enough to eat
HT: reason.com
UK Labour supporters admit it: taxes are to punish the rich, not to raise revenue
08 Jul 2014 Leave a comment
in labour supply, liberalism, Public Choice, Rawls and Nozick, taxation Tags: envy, expressive voting, top tax rate
via Labour supporters admit it: taxes are to punish the rich, not to raise revenue – Telegraph Blogs and http://danieljmitchell.wordpress.com/2014/02/04/what-motivates-the-left-envy-or-greed/
The median voter theorem
08 Jul 2014 Leave a comment
in Public Choice Tags: median voter theorem
The median voter is the voter in the middle: the voter who has as many voters on either side of him.
Milton Friedman – A Conversation On Minimum Wage
07 Jul 2014 Leave a comment
in applied price theory, labour economics, minimum wage, Public Choice Tags: Free to Choose, Milton Friedman, minimum wage
The application of John Rawls difference principle to New Zealand
07 Jul 2014 Leave a comment
in applied price theory, income redistribution, politics - New Zealand, Rawls and Nozick Tags: difference principle, income distribution, John Rawls, Maori economic development, Pasifika economic development
An urban legend in New Zealand is that income inequality is going from bad to worse.
Since the mid 1990s to around 2011 there was a small net fall in New Zealand’s income inequality trend line in the graph for the Gini coefficient for the income distribution for New Zealand shows. inequality in New Zealand is similar to that in Australia, Ireland, Canada and Japan.
Source: Ministry of Social Development (2014)
Taxes and transfers have reduced inequality in New Zealand when measured by Gini coefficients, but the trend is been relatively stable for many years.
Source: Ministry of Social Development (2014)
Rawls pointed out that behind the veil of ignorance, people will agree to inequality as long as it is to everyone’s advantage. Rawls was attuned to the importance of incentives in a just and prosperous society. If unequal incomes are allowed, this might turn out to be to the advantage of everyone. Robert Nozick said that:
Political philosophers must now either work within Rawls’s theory or explain why not.
The groups that have been doing best in New Zealand have been Maori and Pasifika. In real terms, overall median household income rose 47% from 1994 to 2010; for Maori, this rise was 68%; for Pacific, 77%!
Source: Ministry of Social Development (2014)
The large improvements in Māori incomes since 1992 were based on rising Māori employment rates, fewer Māori on benefits or zero incomes, more Māori moving into higher paying jobs, and greater Māori educational attainment (Dixon and Maré 2007).
Maori unemployment reached a 20-year low of 8 per cent from 2005 to 2008. Labour force participation by Maori increased from 45% in the late 1980s to about 62% in the last few years.
Most of the remaining income disparities between Māori and non-Māori flow from differences in educational attainment and demographic and socio-economic characteristics including household composition (Chapple 2000; Maani 2004; Dixon and Maré 2007).
How much of the massive increases in incomes over the last 20 years spread throughout the entire community are you willing to give up for a little more equality? How much of your income will you donate to charity to lead the way?
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Economic policy uncertainty and political polarisation in the USA
07 Jul 2014 Leave a comment
in macroeconomics, Public Choice Tags: policy uncertianty, political polarisation
John van Reenen, Nicholas Bloom, Scott Bakerand Steven Davis produced these nice charts for the LSE blog:
The 90th Congress of 1967-68 showed a considerable overlap in voting patterns between Democrats and Republicans along liberal and conservative issues allowing the possibility of more compromise. But there was essentially no voting overlap by the 100th Congress of 2007-08.
The system is working at last: The House And Senate Are the Most Divided in Our Lifetimes
06 Jul 2014 Leave a comment
in Gordon Tullock, James Buchanan, politics - USA, Public Choice Tags: bicameralism, constitutional design, public choice
One of the lessons of public choice for constitutional design is there should be two Houses of Parliament and each should be elected by a different method and different geographical basis.
Lower houses tend to be elected in single member constituencies; upper houses tend to be elected in larger multi-member, state-wide or national constituencies by proportional representation.
This diversity in legislative arrangements ensures that more people are participating in decision-making and it is harder to pass new laws without majority support.
The two elected chambers will clash as each exerts its mandate to represent the will of the people who elected it. The laws that pass these two chambers elected by different methods must have substantial popular support.
When upper and lower houses are elected by similar methods, it is much easier to assemble a majority through vote trading and lobbying.
Data via fivethirtyeight.com
The vote splitting comes from expressive voting
06 Jul 2014 Leave a comment
in Public Choice Tags: expressive voting
Expressive voting is the voting where people express themselves in support of things they approve of, and in opposition of what they disapprove of and make statements about themselves and what they belong to.
- Voting is much like sending a get-well card, or cheering for the home team, or booing the visiting team.
- We send the card and cheer primarily because of the expressive satisfaction it provides to us.
If hundreds of thousands or millions vote on the same election, how you vote simply does not matter, so you can use it to feel good about yourself and a developer self-identity of this caring person. Voting becomes rather like cheering at a football match – the more noise the better but how loud you cheer as an individual doesn’t matter that much so you can cheer from whether you like.
The trouble is in expressive voting theory, voters know that feel-good policies are ineffective. Expressive voters do not necessarily embrace dubious or absurd beliefs about the world. The expressive voting is not a product of ignorance, it’s a product of the fact that your vote is one among so many and will not change the result of the election.
Expressive voting not only explains why a lot of people vote, it also explains the higher voter turnout of the more educated. It also explains why people are more likely to vote in national elections than in local elections even though their vote is more likely to be decisive in local elections.
Expressive voting also explains why people often vote against their personal interests. The fact is that voting against your interests cost you almost nothing when there are countless others voting too. Voting against your interest seems to have some hair-shirt benefit.
That said, expressive voting is like any other good in demand, demand for a expressive voting declines with as the cost of it goes up. There is less expressive voting when elections are close and as the cost of policies supported by the expressive voter go up.
Under the preferential voting system in Australia , instead of voting for the Australian Labor Party, a swinging voter can vote Green as a protest vote and then vote liberal
If there were no greens to vote for, some of the protest vote will stay with Labour because the voter cannot cop-out and split their vote while still feeling good about themselves but still be able to vote for their wallets and vote for right-wing party.
The decline of class as a factor in voting
03 Jul 2014 Leave a comment
in politics - Australia, Public Choice Tags: voter demographics
At the UK General Election of 1964, a 2% of voters with no ‘working class characteristics’ voted Labour.
People’s socio-economic characteristics are now much less significant than they used to be as indicators of how they are likely to vote, for not only do many working class people vote for parties of the right, but large swathes of the middle class now vote Labour.
Support for Labor among manual working class voters as a whole was no higher than support for the right-wing parties in the 2004 Australian election.
If lower grade white collar occupations are included as working class, the right-wing parties in Australia actually achieved a small lead over the Australian Labor Party among working class voters.
POSSUM COMITATUS asks why are the Greens strongest in the inner cities? What is the cause of Greens voters living in the inner cities?
He found that people working in the arts, education, media and technology industries are more likely to vote Green, and as a result of the distribution of workplaces for these industries having a higher density in the inner suburbs, the people living within close proximity to their workplaces naturally leads to the inner cities having higher levels of Greens voters. He concludes:
it’s just a modern evolution of class based electoral analysis – whereas the Labor vote used to correlate strongly with manufacturing and low skill, labour intensive industries – today, the Green vote correlates with new skilled services industries like arts, education, media and technology.
Inequality is in; discrimination is out for Next Generation Left
02 Jul 2014 1 Comment
in applied price theory, income redistribution, politics - USA, Public Choice, Rawls and Nozick Tags: discrimination, inequality, Leftover Left, poverty, The Progressive Left
Milton Friedman on raising the minimum wage – the most ‘anti-black law in the land’
01 Jul 2014 Leave a comment
in applied price theory, labour economics, minimum wage, Public Choice Tags: Milton Friedman, minimum wage
The minimum wage law is most properly described as a law saying that employers must discriminate against people who have low skills. That’s what the law says.
The law says that here’s a man who has a skill that would justify a wage of $5 or $6 per hour (adjusted for today), but you may not employ him, it’s illegal, because if you employ him you must pay him $9 per hour.
So what’s the result? To employ him at $9 per hour is to engage in charity. There’s nothing wrong with charity. But most employers are not in the position to engage in that kind of charity.
Thus, the consequences of minimum wage laws have been almost wholly bad. We have increased unemployment and increased poverty.
Piketty and Pension Fund Socialism
01 Jul 2014 1 Comment
in financial economics, human capital, income redistribution, rentseeking Tags: pension fund socialism, Peter Drucker, Piketty
Any attack on capitalism these days is a direct attack of the retirement savings of ordinary workers. We live in the age of what Peter Drucker called pension fund socialism in 1976. As Drucker added in 1991:
The rise of pension funds as dominant owners and lenders represents one of the most startling power shifts in economic history.
The first modern pension fund was established in 1950 by General Motors.
Four decades later, pension funds control total assets of $2.5 trillion, divided about equally between common stocks and fixed-income securities. Demographics guarantee that these assets will grow aggressively for at least another ten years.
The majority of equity capital is owned by pension funds and other collective investment vehicles corralling the savings of ordinary people. Much of the rest of physical capital is owned by workers through home ownership.
In the age of human capital, 70-90% of all capital in the economy is human capital. The notion of unskilled workers labouring away with the capital supplied by the bosses is 19th century throwback.
The rentier rich has been long replaced by the working rich. They make their fortunes in their own life times – sometimes as business entrepreneurs, sometimes through rent-seeking.
It is also the age of specific human capital, with a proliferation of technologies and products. The rising specialisation of firms and their production inputs has forced firms to try harder to find those inputs that suit their needs best. Management has the task of finding the right inputs. The role and reward to managers has therefore risen.
When the rise in returns on investments in human capital is beneficial and desirable, and policies designed to deal with inequality must take account of its cause. Growth in education levels has been a significant source of rising wages, productivity, and living standards over the past century.
The initial impact of higher returns to human capital is wider inequality in earnings, but that impact becomes more muted and may be reversed over time as young people invest more in their human capital.
The rentier class has been replaced by the working rich. The evidence on the top 1% is most consistent with theories of superstars, skill biased technological change, greater scale and their interaction of these factors.
Individuals who are really good at making money can now apply their skills to larger amounts of capital and reach far larger audiences and markets for their products and services. That favours CEOs, athletes, celebrities, corporate lawyers, successful entrepreneurs and other working rich Who have a skill or talent that can be supplied at little cost on a much larger scale. Some have a special dark place in their hearts for people who earned their money through honest hard work.
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