Killing capitalism softly
John Holbo has a question:
I’ll state my question first: to what extent did people believe, in the 30’s and early 40’s, that capitalism was doomed?
I’ve been reading James Burnham, The Managerial Revolution (1941). And I would like to propose (but I am happy to be corrected) that he was the anti-Fukayama of his day. Just as everyone violently attacked Fukayama’s bestseller as speculative and rather wishful prophecy, while basically agreeing that, yes, it looks like liberal democracy and globalization will be dominant for the foreseeable future; so it seems lots of people attacked Burnham’s bestseller as speculative and even wishful prophecy, while basically agreeing with his major premise that capitalism and liberal democracy were on their last legs. (In case you don’t know, Burnham is one of those who started as a Trotskyite and ended by writing for National Review.)
To a first approximation, everyone in the 1930s and 1940s seems to have believed that capitalism, and quite possibly democracy, were headed for the ashbin of history; the hope (or fear) appears in the writings of everyone from Orwell to Hayek. The question I have is, given this near-perfect consensus, how did we manage to snatch victory from the jaws of defeat? Or did we? We are, it seems, gearing up to nationalize an industry that accounts for 16% of national output--and even libertarian bloggers have been known to speak out in favor of that most socialist of institutions, the Federal Reserve.
This just in
As mortgages become a more popular means of financing homes, home equity falls. Also, once mortgages are common, high inflation increases the amount of equity you have in your house, relative to the residual value of your mortgage. And don't forget to tune in at 11 for our special investigative report: government subsidies cause increases in whatever it is they are subsidizing.
We had to destroy the village in order to save it . . .
I genuinely don't get this comment. I mean, I understand that there are people who think it is immoral that the educated should earn substantially more than people who clean houses. But it seems to me that the obvious solution to this dilemma, until you have effected the radical political change you believe will rectify this situation globally, is to give away all of your salary in excess of the wage of the average housecleaner. Ideally, you would donate it either to people who clean houses, or to some organization you believe will improve their earning prospects.
If you are not going to take the obvious route (and apparently no one is), then I really do not see how you could believe that the best way to help housecleaners is to refuse to hire them. In my universe, decreasing the demand for a good or service drives the price of that good or service down, making whoever supplies it worse off. How often do you meet private contractors who are grateful not to be offered work? If you think housecleaners get paid too little, then you should be hiring as many as you can afford, in order to increase the local demand for unskilled labor, not shunning them. And if you think I'm wrong, why not ask your friendly local independant cleaning lady what she thinks?
Department of Economic Illiteracy
I know, I link Ryan Avent all the time. Well, you'll just have to put up with it, because this is too good to pass up. He finds the Baltimore Sun saying:
The $3.9 billion figure is especially imposing because it is expressed in 2007 dollars. By the end of the planning period in 2035, inflation could add billions to the final total.
And do you realize that while the sandwich I had for lunch cost me $6.50, I could have bought it for 30¢ in 1913! How can I afford it? I'll starve to death?
Process of deduction
A couple of commenters and emailers have asked me to defend my assertion over at TPMCafe that:
At the time, Gore was offering tax deductions or credits for practically anything one might do, from getting born to entering a nursing home. These sorts of tiny lump-sum deductions are generally frowned on by economists; they distort activity, are costly to administer, and unlike marginal rate cuts, provide no positive incentives to increase work.
This is not actually particularly controversial, and the economics is (I think) kind of interesting and important, but at the same time, the explanation is not quite right for the TPMCafe format, so I'll try it here. For anyone who cares, it's below the fold, as it's rather lengthy and a little bit technical. Apologies for those who know all this and find it old hat; this is only for wannabe tax wonks.
Continue reading "Process of deduction" »
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