However, let's not be surprised. At the abstract level, one cannot expect people to generally comprehend economic principles. They are not the soil of everyday experience. Francis Ysidro Edgeworth once wrote that economics is about a few general principles; business is about a thousand details. Business is just an example, albeit a good one. People's everyday decisions are intimately linked to details. Daily success depends upon the details, not the general principles. [I just read a WSJ article with a headline about September's inflation number. It was in fact about changes in relative prices.] That success in individually coping with details can collectively lead to cumulative failing at it and lead to catastrophe is something that must be studied abstractly. It is not something experienced every day.
At the theoretical level, there is no reason why anyone should like economic principles. Economics is all about constraints. Constraints constrain. Let's remove them!
And we have a mechanism to seemingly remove them -- politics. If enough band together to get a personal constraint removed and place the constraint on somebody else, the political system is amenable, including placing the costs on Elon Musk or future generations.
Those of us have come to know this stuff, realize it’s not that hard to understand, but it takes the right educational environment, which we don’t have at this point. As the author writes we have politicized bureaucrats in charge (running school administrations, the DMV, etc). So to educate the masses, these sort of posts, like Obi-wan, are our only hope!
The reason for all the subsidies is the fact that many people simply do not make enough money to pay for rent, health care, college education, etc. Even if you remove all the subsidies and prices come down, it still.won't be enough. Have you heard what just happened in Spain? What you are really complaining about is the capitalist system we have in this country. It leaves too many people behind. Even if they have a full time job, many are unable to afford basic necessities of life. Income and wealth inequality is too large. The only way to address the problem is.to go after the inequality. You raise taxes on the wealthy and reduce them on.the lower income people. The extra revenue collected pays for housing, health care, education of people who cannot afford them. If you believe that is impossible or will not work in the richest country in the world, look e.g. at Sweden, Denmark, Finland. Compare the Gini index of those countries with the US.
The basic premise of your argument shows you have a gap in understanding the central thesis of this article. You also are not providing any supporting facts or arguments. You have a premise for the reason that people can't afford things and don't demonstrate why that is true. You make no allowance for the affordability issue being caused by government intervention. Example, the two areas of the US economy with the largest prices rises and Healthcare and Secondary Education. Those are the two areas that the government follows your advice the most. Yes, the US has a higher Gini index then those largely homogenous Nordic countries and most other nations. My question to you is so what? Where is the data that shows this is a problem? People in the US have top 5 highest median income in the world, higher then any other OECD country.
There is not a finite amount of wealth, it is created. When an artist makes a new painting wealth expands, no one is harmed by it. If I buy the painting for $1,000 I now have a painting worth $1,000. The artist transformed $100 (maybe less) in supplies and comes out $900 ahead. It doesn't make anyone poorer. If the artists is talented enough it could concentrate wealth in her hands. The world is better off.
One ultra-important issue: the welfare state in Denmark or Sweden is funded by an ultra-broad tax base, mostly by low- and middle-income people paying a lot of taxes for good public services—not by billionaires. This is the opposite of, say, the UK, where most of the tax is paid by high earners and not by low earners (first 12k GBP is tax free if I remember correctly so millions are not paying much of taxes), and good to know that the UK has fewer billionaires proportionaly than Sweden (58 in UK and 50 in Sweden by Forbes).
This is the source of Scandinavia's success: you are paying—poor, rich, everbody—for a government elected by you to deliver services. You have agency, you are forced to be wise, to participate and select the right people to spend your hard earned money. It's a high-tax, high-spend & high-trust society (plus almost no lobbying money in politics).
To change the situation in the US, the first step is not to tax billionaires with a wealth tax, but to implement a broad tax hike for everybody and every company: big and small, poor and rich. Just go back to taxation from Clinton times.
Excellent post; thank you. You discuss tribalism, the fallacy of composition (aka failure to appreciate complexity), nostalgia, and the tendency to zero-sum-gain thinking. Don't forget hubris and the fallacy of eutopia on earth.
Yes, it's all true! Well stated.
However, let's not be surprised. At the abstract level, one cannot expect people to generally comprehend economic principles. They are not the soil of everyday experience. Francis Ysidro Edgeworth once wrote that economics is about a few general principles; business is about a thousand details. Business is just an example, albeit a good one. People's everyday decisions are intimately linked to details. Daily success depends upon the details, not the general principles. [I just read a WSJ article with a headline about September's inflation number. It was in fact about changes in relative prices.] That success in individually coping with details can collectively lead to cumulative failing at it and lead to catastrophe is something that must be studied abstractly. It is not something experienced every day.
At the theoretical level, there is no reason why anyone should like economic principles. Economics is all about constraints. Constraints constrain. Let's remove them!
And we have a mechanism to seemingly remove them -- politics. If enough band together to get a personal constraint removed and place the constraint on somebody else, the political system is amenable, including placing the costs on Elon Musk or future generations.
I wrote a song with quotes from Adam Smith, including the one you allude to in your text: https://www.youtube.com/watch?v=-RWK9gxOsqI
Thank you for writing this post!
It is short yet very informative!
Those of us have come to know this stuff, realize it’s not that hard to understand, but it takes the right educational environment, which we don’t have at this point. As the author writes we have politicized bureaucrats in charge (running school administrations, the DMV, etc). So to educate the masses, these sort of posts, like Obi-wan, are our only hope!
Thank you again!
This is by far the best of your 3 rants here.
One of the best, most concise I’ve ever seen.
I plan to forward this along as a primer on basic economics and public policy.
Thank you!
Well said.
The reason for all the subsidies is the fact that many people simply do not make enough money to pay for rent, health care, college education, etc. Even if you remove all the subsidies and prices come down, it still.won't be enough. Have you heard what just happened in Spain? What you are really complaining about is the capitalist system we have in this country. It leaves too many people behind. Even if they have a full time job, many are unable to afford basic necessities of life. Income and wealth inequality is too large. The only way to address the problem is.to go after the inequality. You raise taxes on the wealthy and reduce them on.the lower income people. The extra revenue collected pays for housing, health care, education of people who cannot afford them. If you believe that is impossible or will not work in the richest country in the world, look e.g. at Sweden, Denmark, Finland. Compare the Gini index of those countries with the US.
The basic premise of your argument shows you have a gap in understanding the central thesis of this article. You also are not providing any supporting facts or arguments. You have a premise for the reason that people can't afford things and don't demonstrate why that is true. You make no allowance for the affordability issue being caused by government intervention. Example, the two areas of the US economy with the largest prices rises and Healthcare and Secondary Education. Those are the two areas that the government follows your advice the most. Yes, the US has a higher Gini index then those largely homogenous Nordic countries and most other nations. My question to you is so what? Where is the data that shows this is a problem? People in the US have top 5 highest median income in the world, higher then any other OECD country.
There is not a finite amount of wealth, it is created. When an artist makes a new painting wealth expands, no one is harmed by it. If I buy the painting for $1,000 I now have a painting worth $1,000. The artist transformed $100 (maybe less) in supplies and comes out $900 ahead. It doesn't make anyone poorer. If the artists is talented enough it could concentrate wealth in her hands. The world is better off.
One ultra-important issue: the welfare state in Denmark or Sweden is funded by an ultra-broad tax base, mostly by low- and middle-income people paying a lot of taxes for good public services—not by billionaires. This is the opposite of, say, the UK, where most of the tax is paid by high earners and not by low earners (first 12k GBP is tax free if I remember correctly so millions are not paying much of taxes), and good to know that the UK has fewer billionaires proportionaly than Sweden (58 in UK and 50 in Sweden by Forbes).
This is the source of Scandinavia's success: you are paying—poor, rich, everbody—for a government elected by you to deliver services. You have agency, you are forced to be wise, to participate and select the right people to spend your hard earned money. It's a high-tax, high-spend & high-trust society (plus almost no lobbying money in politics).
To change the situation in the US, the first step is not to tax billionaires with a wealth tax, but to implement a broad tax hike for everybody and every company: big and small, poor and rich. Just go back to taxation from Clinton times.
Excellent post; thank you. You discuss tribalism, the fallacy of composition (aka failure to appreciate complexity), nostalgia, and the tendency to zero-sum-gain thinking. Don't forget hubris and the fallacy of eutopia on earth.