Adam Smith's invisible hand metaphor and the related concept of economic efficiency have dominated policy debates. We discuss why and how ethical and moral issues must also come into play.
Some think tank economists, who have felt it time to end the deregulation experiment, which seems to have recreated the pre antitrust, Robber Barren era, have an interesting take on the Biden stop inflation bill. Clearly the name has little to do with what it does. I found their analysis interesting.
Milton Friedman and Friedrich Hayek before him argued against government regulation and favored eliminating regulation, lowering taxes on the wealthy, and the result would be a “let e’r rip” fast growing economy that would lift all boats. Mind you the economy had done quite nicely after WWII, providing 5% of our 1958 GDP to Europe in the Marshall Plan. Lots of people look back fondly at the GDP growth rates from 1945 to the 1970s.
The “stagflation” in the 1979’s lead to a great experiment, lowering tax rates that were supposed to fund themselves with greater growth, and placing the stock holder as the one and only stake holder. With the stockholder wanting cash cows, GE, Thomas Edison’s amazing invention machine, was milked to death, and is being liquidated.
Greenspan and Friedman promised no more boom and bust, better distribution of wealth, higher GDP growth rates. Greenspan, a few rears before the 2008 financial bust, declared the economy “recession proof.”
What we got was lower GDP growth rates, regional disparity like rural America and the rust belt, hollowed out companies and communities, innovation and jobs departing over seas.
We have been digging deeper in this hole for 40 years. Time to throw away the shovel.
This podcast starts with a take down of our 40 year experiment, and unpacks Biden’s Inflation protection bill, for what it really is a rejuvenation of key industries.
All of these are debatable. In my opinion, the speeding fine is an example of a fair outcome. The thinking is that the fine for speeding is a certain number of days of income because a $100 fine means something very different for a minimum wage worker than for a highly paid executive. (Of course, to fully balance impact you’d have to look at wealth not just income.) Another example is money bail in criminal cases. Bail set at $1,000 may be an insurmountable barrier to one person but trivial to another. In some jurisdictions, a person’s income/wealth is supposed to be consider when setting money bail.
More commonly, the fair process / fair outcome distinction is applied to situations in which a decision has to be made. For example, suppose that there’s a great school that can accept a limited number of students. A fair process might be that everyone takes an entrance exam and the top scoring applicants get accepted. Suppose that this results in a class of 95% children of upper-income parents. A fair outcome process might additionally impose a requirement that the distribution of students’ parents’ income approximately matches the distribution of incomes in the society.
Different people will have different views on what is really “fair”. And sometimes, the supposedly fair process is biased. I don’t recall a reference offhand, but there’s a well-known example about the gender of musicians in great orchestras. It used to be that most great orchestras had primarily male musicians. This was considered fair because everyone had to audition and the best musicians were chosen. Then an experiment was done in which the auditions were done behind a curtain. The gender balance changed dramatically. The supposedly fair audition process was actually biased in favor of male musicians.
Thanks Lee. Some clear and well-designed "thought experiments" are needed to help clarify all this. Rawls in his classic "Theory of Justice" uses a "thought experiment:" If you had your place switched with another random person in the society, would you see the processes and outcomes as fair?
I suspect that different people will have different perceptions of fairness. For example, the poor person who gets a $100 ticket on the way to a minimum wage job will probably think that it is unfair that the ticket costs him what he earns from two days’ work, but costs a highly-paid person less than an hour’s work. On the other hand, the highly-paid person would view the Nokia exec’s fine as outrageous.
Some think tank economists, who have felt it time to end the deregulation experiment, which seems to have recreated the pre antitrust, Robber Barren era, have an interesting take on the Biden stop inflation bill. Clearly the name has little to do with what it does. I found their analysis interesting.
Milton Friedman and Friedrich Hayek before him argued against government regulation and favored eliminating regulation, lowering taxes on the wealthy, and the result would be a “let e’r rip” fast growing economy that would lift all boats. Mind you the economy had done quite nicely after WWII, providing 5% of our 1958 GDP to Europe in the Marshall Plan. Lots of people look back fondly at the GDP growth rates from 1945 to the 1970s.
The “stagflation” in the 1979’s lead to a great experiment, lowering tax rates that were supposed to fund themselves with greater growth, and placing the stock holder as the one and only stake holder. With the stockholder wanting cash cows, GE, Thomas Edison’s amazing invention machine, was milked to death, and is being liquidated.
Greenspan and Friedman promised no more boom and bust, better distribution of wealth, higher GDP growth rates. Greenspan, a few rears before the 2008 financial bust, declared the economy “recession proof.”
What we got was lower GDP growth rates, regional disparity like rural America and the rust belt, hollowed out companies and communities, innovation and jobs departing over seas.
We have been digging deeper in this hole for 40 years. Time to throw away the shovel.
This podcast starts with a take down of our 40 year experiment, and unpacks Biden’s Inflation protection bill, for what it really is a rejuvenation of key industries.
https://podcasts.apple.com/us/podcast/the-weeds/id1042433083?i=1000577137777
I’ve been traveling and have not yet listened to the podcast, but I’ll try to do that this week.
Questions: Finland's Nokia exec speeding fine - is that an example of fair outcome? Fine based on level of income/wealth?
Comments: Fair process seems blind to actor's wealth. Fair outcome seems to require factoring in wealth.
Just wondering...
All of these are debatable. In my opinion, the speeding fine is an example of a fair outcome. The thinking is that the fine for speeding is a certain number of days of income because a $100 fine means something very different for a minimum wage worker than for a highly paid executive. (Of course, to fully balance impact you’d have to look at wealth not just income.) Another example is money bail in criminal cases. Bail set at $1,000 may be an insurmountable barrier to one person but trivial to another. In some jurisdictions, a person’s income/wealth is supposed to be consider when setting money bail.
More commonly, the fair process / fair outcome distinction is applied to situations in which a decision has to be made. For example, suppose that there’s a great school that can accept a limited number of students. A fair process might be that everyone takes an entrance exam and the top scoring applicants get accepted. Suppose that this results in a class of 95% children of upper-income parents. A fair outcome process might additionally impose a requirement that the distribution of students’ parents’ income approximately matches the distribution of incomes in the society.
Different people will have different views on what is really “fair”. And sometimes, the supposedly fair process is biased. I don’t recall a reference offhand, but there’s a well-known example about the gender of musicians in great orchestras. It used to be that most great orchestras had primarily male musicians. This was considered fair because everyone had to audition and the best musicians were chosen. Then an experiment was done in which the auditions were done behind a curtain. The gender balance changed dramatically. The supposedly fair audition process was actually biased in favor of male musicians.
Thanks Lee. Some clear and well-designed "thought experiments" are needed to help clarify all this. Rawls in his classic "Theory of Justice" uses a "thought experiment:" If you had your place switched with another random person in the society, would you see the processes and outcomes as fair?
I suspect that different people will have different perceptions of fairness. For example, the poor person who gets a $100 ticket on the way to a minimum wage job will probably think that it is unfair that the ticket costs him what he earns from two days’ work, but costs a highly-paid person less than an hour’s work. On the other hand, the highly-paid person would view the Nokia exec’s fine as outrageous.