Posted by: CJ | July 9, 2010

Politics & Economics Crankery

I’ve read three posts on other blogs today that put me in a bad mood.

The first was Ezra Klein on Social Security reform Congress is semi-seriously contemplating. They’re thinking about raising the retirement age to 70. As Klein points out, that’s a really dick-ish thing to foist on everyone. And while it’s true that we’re living longer than people did when Social Security was passed, we’re also richer. It really annoys me, inasmuch as it speaks to the psychology of Congress and the political class, but I doubt it’ll go anywhere. Social Security is rather popular, and they aren’t going to make changes without making their case.

The second piece is David Henderson commenting on unemployment benefits. His post is mainly critiquing comments of Arthur Laffer, but Henderson ends with this: “If unemployment insurance is such a great idea, let the free market provide it.” I’m not wedded to that as good public policy, but it made me realize that for unemployment benefits, as well as a huge host of other government provided services, we aren’t really clear what the free-market value of the service would be. Which is kinda unfortunate, because I think it does mean people have a disconnect between the value of the services government provides compared to their tax bill. They just have no idea what they’re getting, and so they can get pretty pissy about taxes.

(On the other hand, I am familiar with both cell phones and textbooks. And in both cases sellers charge what the market will bear and not what the cost of the item really is. Not to mention insurance products have a history of taking awhile to find the right pricing scheme. So, like I said, I’m not saying eliminating government-provided services is a good idea or that free markets price things perfect or fairly. I’m just saying it’s a shame what those things would cost isn’t well-known, or better yet common knowledge.)

And, to complete the day’s reading, Scott Sumner (who’s becoming my favorite econ blogger to read, along with Tyler Cowen, since Brad DeLong’s mostly doing policy advocacy these days) has a post on how systematic bailouts in financial crises over the past three decades have possibly shaped our economy into a sick joke of a pyramid scheme. It’s an interesting, though somewhat complicated, post that I wish more people would talk about.

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