The General Economics Thread

It could be done either way. Let's not get too caught up in the mechanism.

No, I meant dont give him the stipend and still tax him 100K. That nets the state 50K.

But then you have to means test people, which adds more bureaucracy. It's like healthcare. Just give it to people no matter what, and pay for it at the back end with general revenue.

Sure, the guy making $1 million doesn't need the extra $50K, but it doesn't hurt to give it to him.

Hmm, if you're that concerned about it, have the stipend system set up so that people can opt out of receiving it if they earn enough that they'd have to pay it back in taxes.

edited 26th Feb '14 7:00:22 AM by Fighteer

I'm going to beat my Milton Friedman drum again and suggest a negative income tax. Give 25k to everyone, then have a 50% marginal tax on the first 50k of your income.

Never knew you were such a conservative, Fighteer. :P

Negative progressive income taxes are conservative, now? Gee, someone tell the Republican Party. By that standard I suppose I'd have to be a card-carrying member of the Communist Party to be considered liberal.

edited 26th Feb '14 8:40:46 AM by Fighteer

Yep, negative income taxes are a conservative idea. Just like a healthcare public option.

Granted, Friedman only came up with the idea because he knew that his own preferences (removing both the welfare state and the income tax entirely) made absolutely no sense, but it's a good idea nonetheless.

I think that in an alternate reality where the U.S. Republican Party and its analogues around the world were sane conservatives instead of radical reactionaries, I would be a member of that party. Too bad it no longer really exists.

Heck, Keynes considered himself a conservative. He was all for free markets and capitalism — properly regulated, of course.

Addressing climate change is a conservative issue, in the sense that massive shifts in global climate will be a source of instability and change. Addressing wealth inequality is a conservative issue, because failing to address it should be obviously recognizable as a source of instability and revolutionary change.

edited 26th Feb '14 9:45:02 AM by Fighteer

Well, remember that in Keynes' day, "socialism" meant the likes of the Bolsheviks on one hand and deathpigeon on the other. So the bar's a bit farther to the right on all counts.

But we have a conservative party right now; they're called the Democrats. They just happen to be conserving and incrementally improving upon the status quo that came in with the New Deal.

Well, color me a staunch Democrat.

No, socialism in Keynes' day also meant people like the Indian National Congress and the British Labour Party. Both of whom were rather successful.

Clement Attlee was economically not that different from Lenin, apart from the difference in the circumstances of their countries. Both socialists pursued a goal of state control of the commanding heights of the economy, but allowing private industry to build off that (Labour even wanted to nationalize farmland, though it didn't pan out). It's not just the welfare state aspect, but also a significant amount of government control over core sectors of the economy, which isn't on the modern socialist (or, usually, the Keynesian) radar.

Remind me again how many people Attlee killed, how many landlords he totally expropriated, how many industrialists he had killed, and how many foreign nations he invaded to try and spread his ideology?

What you just said is like saying "there's not much difference between Obama and Caesar - they both wanted to be head of state".

"Economically." I'm examining their respective economic visions specifically, not the whole of their political activities. They were both state capitalists who saw the state's role as controlling the core of the economy, while allowing small industry to be under private control.

I'm well aware that Clement Attlee didn't kill nearly as many people to get where he wanted to go. Don't change the subject.

edited 26th Feb '14 10:15:58 AM by Ramidel

Except it's a comparison that borders on the absurd.

The 1945 Labour manifesto sets out, under "Industry in Service to the Nation", the following seven points: 1. Public ownership of the fuel and power industries. 2. Public ownership of inland transport. 3. Public ownership of iron and steel. 4. Public supervision of monopolies and cartels. 5. A firm and clear-cut program for the export trade. 6. Price controls, and 7. Better organized government.

These were all tied into a promise of full employment, with an eventual establishment of "The Socialist Commonwealth of Great Britain" to follow in the far off future.

Lenin's economic policy can be split into War Communism and the NEP.

War communism actually made private enterprise illegal entirely. Rather than, as Britain had, buying off industries, it expropriated them.

The NEP was introduced only after the total failure of War Communism to deliver...well, anything - so it was a practical, rather than ideological move - and it's main branches were the replacement of grain requisitions with a food tax, the tolerance of small business, and permitting private trade - ie, individuals buying and selling rather than being given them by the state.

Let's parse and compare them them:

Points 1, 2, and 3 all refer to nationalization; Attlee did indeed nationalize a large part of the British economy. Labour kept it's manifesto committments and, at it's maximal extent, had taken 20% of the British economy into state ownership. In essence, the core aim was to nationalize basic industries and utilities - the government keeps the lights on, keeps the roads and railways running, and preserves the nations stockpiles of iron and steel for private enterprise to exploit.

By contrast, Lenin demanded the total nationalization of heavy industry; not simply core industries, but all of them. Attlee's ideology allowed and encouraged, for instance, Britain's thriving post-WWII aerospace, marine, and automotive industries. Attlee's position was that the state should be a foundation. Lenin's position was that the state should be over-arching. It's like saying that eating only the blue Smarties in the tube is the same as eating everything but the blue smarties.

Attlee bought, Lenin expropriated. I suppose that Attlee didn't ruin the people he bought out, while Lenin shot the people whose businesses he took over, but economically, both were takeovers of the economic backbone of the country. I'll concede that "all heavy industry" is a broader grip than "coal, steel, railways, and the commanding heights of the economy," sure. But Lenin's goal was still a mixed economy. You're also right that it was a pragmatic measure because the guy realized that War Communism flat-out didn't work, but I fail to see how that makes it "not Lenin's plan."

So while there was a difference in degree and methodology, and even in endgame, I doubt that it's absurd to note the similarities in their approach.

I'm not really sure where this "commanding heights" comes from. The Labour position was that the state should provide for both the public and the private sectors. Utilities and steel nationalization was part of that. If anything, the "commanding heights" of the postwar British economy were manufacturing and the emergent service sector, both of which Attlee left alone.

"Commanding heights of the economy" is a Leninist phrase. I appear to have been misusing it; the purpose for it under Lenin is to allow socialist accumulation of power and wealth, while accepting that agriculture, trade and cottage industry just don't work on a command basis. Modern China's also adopted this principle, though with a wider potpourri of economic systems.

On another subject, an amusing quote:

That's right. The founder of the Austrian School is a dirty communist.

edited 26th Feb '14 1:56:30 PM by Ramidel

Incidentally, Labour didn't manage this:

Not totally, by any means. There was one major public transport group in private ownership^note  The BET Group; it did sell out to the THC in 1968, though., and many private bus and coach firms, some quite large. Also, Nationalisation didn't cover the private fleets of manufacturing firms, or farmers' own transport — there were loopholes, and they were well-exploited.

edited 26th Feb '14 1:59:03 PM by Greenmantle

The things that Hayek wrote seem to frequently be in conflict with the things that his supporters advocate.

The Austrians (like Friedman-followers) tend to be of the sort who believe that the minimum income is the best possible solution (minarchist utopia being the ideal, but acknowledged as unnatainable by most in the movement). So it really comes as no surprise

That's why i feel the minimum income will become the standard of the 21st-century social contract. It won't be a hard sell to the leadership of the Right (though it would be to the Right's base. Small businesses in particular would fume at the idea of non-workers getting anything. Big business wouldn't care because the overall move could be tax-neutral).

I read an article lately (may have been linked here, may have been a Krugman post, I forget) that discussed how the "noble small business owner" that Republicans love to talk up is in large part a myth.

If you own a small business, you are likely not by any rational definition of the term wealthy, and you stand to benefit from most pro-worker policies in the sense of rising demand giving you more business. You also won't see higher taxation to any significant degree unless your income is such that you fall into the top 1 percent, which as I said before is unlikely.

You may see increased labor cost, but unless you are significantly large (50+ workers), you won't be mandated to provide the kinds of benefits that large businesses must since the government will pick up the tab. Obamacare, for example, is a huge benefit to small businesses because their workers can get health insurance without the employer bearing the cost of subsidizing it, giving them a competitive advantage in recruiting workers.

The folks that really, really dislike pro-worker policies are exactly the large corporations that derive a significant chunk of their profits from exploiting low wage workers. Wal-Mart is a king example.

edited 26th Feb '14 2:42:19 PM by Fighteer

@Ramidel

I realize what it means, I just don't understand how it applies to Attlee's program.

As for Hayek; I think a lot of modern anarcho-capitalists, Randians, and libertarians take the view that he was too influenced by the Great Depression, and that he should have, like a good ideologue, hardened his heart and gone: "my theory will sort them out". Certainly, most modern adherents of that tendency seem to be Randians or Mises schoolers.

It's rather amazing how much of the economic thought coming out of the Great Depression was about helping the poor and unfortunate, even on what passed for the conservative side. It was only the real screamers at the margins who held onto the "suck it up, you losers" mentality. That plus the wealthy and their Republican cronies, but those were resoundingly discredited.

But as we gradually forgot the horrors of that time, more and more folks started espousing the Kill the Poor thought process openly. It only really started spreading in the public awareness since the 1970's and the stagflation fiasco, though.

edited 26th Feb '14 2:29:01 PM by Fighteer

Didn't World War II have an effect on that as well?

Plus, the Wealthy are People, too.

edited 26th Feb '14 2:41:34 PM by Greenmantle

The Great Depression was mostly over by the time WWII got into full swing. The mobilization helped end it, though, as even the most hard-line fiscal conservatives got behind "weaponized Keynesianism".

Post-WWII, the New Deal was so firmly in place, and the demand boost created by the war made consumers so cash-rich, that any repeal of those policies became unthinkable.

The wealthy may be people, but wealth has a documented distorting effect on one's psychology, causing you to believe yourself to be uniquely deserving of it regardless of whether you really are. It's especially bad when, having attained modest wealth, you look up the social ladder and see that you have just as far to go to reach the true top as you did to get where you are now. There's a pernicious corrupting influence: to reach the halls of privilege, you must overtly renounce any sympathies for the little guy.

edited 26th Feb '14 2:45:40 PM by Fighteer