Progressive’s views on supply restrictions
Robert Waldmann
I don’t agree with the title of this post and one sentence, but the rest of the post is reasonable, and the data it discusses are very alarming.
Todd Zywicki wrote
Some of the results in this new article by Zeljka Buturovic and Dan Klein in Econ Journal Watch (a peer-reviewed journal of economics) are startling:
67% of self-described Progressives believe that restrictions on housing development (i.e., regulations that reduce the supply of housing) do not make housing less affordable.
51% believe that mandatory licensing of professionals (i.e., reducing the supply of professionals) doesn’t increase the cost of professional services.
Perhaps most amazing, 79% of self-described Progressive believe that rent control (i.e., price controls) does not lead to housing shortages.
Note that the questions here are not whether the benefits of these policies might outweigh the costs, but the basic economic effects of these policies.Those identifying as “libertarian” and “very conservative” were the most knowledgeable about basic economics. Those identifying as “Progressive” and “Liberal” were the worst.
It would be hard to find a set of propositions that would meet with such a degree of consensus among economists to rival these propositions–which boils down to supply restrictions raise prices and price controls create shortages.
The sentence with which I disagree is the one that ends “basic economics.” In that sentence and the title, it is assumed that it is only basic economics if almost all economists agree. This gives the large group of reality denying free market fanatic economists a veto.
More thoughts after the jump
I think these results are part of a pattern in which people refuse to concede anything anything at all to ideological opponents when polled. People say a statement is false to express their opposition to arguments which begin with that statement. That is, if the poll doesn’t allow people to answer “yes, but …” they answer “no”. To put it a bit more harshly, people will often claim that a statement is false if they don’t agree with the conclusions of the policy makers who most enthusiastically make that statement.
Via Matthew Yglesias who wins an Yglesias award for intellectual integrity.
Now the examples present me with a bit of a challenge. I have claimed that I can get any result I want out of an economic model in which people are rational. I will try in these cases, but first stress I am not criticizing Zywicki’s post. The questions don’t include qualifiers as in “must in all imaginable worlds” They refer to actual policies in the real world. Zywicki does not rely on simple theory to argue that progressives are wrong. He mentions extensive empirical evidence (I didn’t quote quite the whole post as that wouldn’t be fair use).
So lets see if I can make economic theory jump through those hoops. The rest of this post is not at all serious and mostly for my amusement.
1) Restrictions on housing
The claim includes an editorial comment by Todd Zywicki. I’m sure this wasn’t part of the question asked of progressives and others, still I accept it as part of the challenge. So let’s see. OK sure. How about this restriction of housing construction — minimum density requirements. Housing must be built so that there is *at least* N independent residences per acre. There is a maximum normal number of rooms and normal number of square feet in a residence corresponding to minimum crowding requirements times 4 people per household. The fraction of residences in any developement of N or more houses larger than this maximum normal size, must be no greater than twice the fraction of households with more than 5 members.
I mean basically take the rules which make housing less affordable and turn them on their heads. A good libertarian will know that only bad things can come from restrictions on building, but an open minded economist can see how preventing builders from building large houses for rich people tends to reduce the price of land and make housing cheaper for the non rich.
If I can’t do this one, Atrios sure can.
2) Mandatory licensing.
OK first assume that people just won’t go to a professional who is not certified in some way — say the profession is brain surgery. This means that the alternatives are a standardized licensing procedure or some other screen. My claim will be that, in some cases, standard legally mandated procedures allow freer entry than the feasible alternative. What would it be ? One possibility is that people only go to a brain surgeon who has a long record of success (as attending surgeon) so long as there are any such brain surgeons. The first brain surgeon in history can get started, but once the very first co-hort build up their record, no entry at all is possible until they simultaneously retire. The result is extremely limited supply.
Alternatively, a credible mandatory test can be applied to all surgeons and people find that *some* newly trained surgeons are just as good as the old experts. The old experts would never voluntarily take this test, since unless and until others prove they are as good, the old experts can exclude new entrants. This means that there is no point in taking the test unless enough surgeons have taken the test that performance as a function of score can be estimated. This means that if some new entrants deviate from the Nash equilibrium and take the test they have wasted their effort.
The informal reputational equilibrium (in a world in which voluntary test participation is possible) is more restrictive than the system with mandatory testing, because people demand the best and have perfectly rational greater faith in a proven record than in a new test.
To get even harder core about rational expectations and Nash equilibrium assume that there are a variety of potential tests (provided by nature in the model) and only by making brain surgeons with proven records take them can one tell which test is correlated with good results in actual surgical practice (this is I can make a model of rational learning a model of Nash equilibrium by saying something is stochastic and even people who know it’s distribution must learn its realization).
3. rent control. This is easy. There is imperfect competition in the supply of rental housing. As a minimum wage law can cause increased employment with monopsony in the labor market, a maximum rent law can cause increased supply of rental housing.
I suspect a few years ago, the corresponding blog post would have noted that progressives don’t believe that minimum wage laws cause reduced employment and that almost all economists agree that it does. That was true of almost all economists a while ago, but isn’t any more.
update: really in the weeds here, but I was thinking about my argument that mandatory licensing can increase supply of professionals. That argument was taken seriously once by John Stuart Mill in “On Liberty” which should be the libertarian bible. OK so Mill was a progressive and a liberal, but he was a classical liberal and believed in free markets in the same way he believed in free speech.
He also was wildly wildly enthusiastic about written exams. He wanted access to all sorts of positions to depend on the score on written exams. His aim was not to restrain entry and drive up the return to those positions. It was the opposite. He believed, based on massive empirical evidence, that the alternative to admission based on writen exams was admission based on belonging to the right social class.
His aim was to make entry criteria objective and anonymous (I don’t think he came up with the idea of having the exams identified only by a number and graded double blind but he was getting there). His advice was followed. In the event, the mandatory exams were often pretty pointless in themselves (having a lot to do with Latin and such). The point was that the mechanical admissions process was less closed than the alternative.
I just add that if customers are not willing to go to Joe’s discount brain surgery, that the same reasoning applies to certification of self employed professionals.
Recall, there is certification, because consumers prefer there to be certification. The mandatory licensing procedure selects the competent, and is less exclusive than any available alternative. I think this argument is actually not just economic theory but a reasonable description of a possible alternative world.
I am also sure that really existing mandatory licensing requirements generally drive professional incomes up, but that’s because of the empirical evidence and not because “economic theory” implies that or anything.
Everybody knows that it is housing shortages that lead to rent controls, not the other way around. 😉
For #1-housing restrictions could just be codes (ie not running electric and gas next to each other.) Won’t reduce quantity because its effect on cost are near minimal.
For #2-quality can also get so bad that the market just kills itself. Many argue that is what happened to the video game market in the early 1980s (the death of Atari). Nintendo came up with a licensing requirement that they must approve games (Seal of Quality) that brought the market back.
Yeah, that paper was awfully embarrassing for progressives, but at the same time it had some pretty questionable aspects. One of their agree/disagree tests was, “Third-world workers working for American companies overseas are being exploited.” Since “exploit” just means “use,” with a negative connotation, I have no idea what that question tests other than, “Do you like American companies hiring overseas,” which is not about economic knowledge at all.
If they had asked, say, “America manufactures less than did 30 years ago,” I suspect they would have caught out substantial numbers of conservatives along with liberals and lefties. But that gets to another problem with the paper, which the authors themselves acknowledge:
We acknowledge a shortcoming about the set of economic
questions used here, and a corresponding reservation. None of the questions
challenge the economic foibles specifically of “conservatives,” nor of “libertarians,”
as compared to those of “liberals”/“progressives.” It would have been
good, for example, if a question had asked about negative consequences of drug
prohibition, or the positive consequences of increased immigration from Mexico.
We doubt, however, that any partisan aspect of the questions much upsets our
interpretations—for reasons to be discussed once the findings are laid out.
Their “doubts” are laid out on page 12 and are, to my mind, wildly unconvincing.
Anyway, somebody needs to repeat this experiment, while asking for agree/disagrees on questions like:
“Social Security is bankrupt, or likely to go bankrupt in the near future.”
“European social democracies have experienced much slower economic growth than the United States.”
“The U.S. private health care system is more efficient than the U.S. public system.”
I suspect the results would look rather more favorable for the left.
Here are the results from the Zogby Survey referenced in the articles and paper:
ECONOMIC ENLIGHTENMENT
Table 2. Percentage INCORRECT by Ideology (using twopoint
scale for question responses).
Restrictions on housing development make housing less affordable.
Progressive 67.6%
Liberal 60.1%
Moderate 45.9%
Conservative 22.3%
Very Conservative 17.6%
Libertarian 15.7%
Mandatory licensing of professional services increases the prices of those services.
Progressive 51.3%
Liberal 50.0%
Moderate 40.7%
Conservative 25.6%
Very Conservative 19.1%
Libertarian 12.7%
Overall, the standard of living is higher today than it was 30 years ago.
Progressive 61.0%
Liberal 52.0%
Moderate 36.9%
Conservative 13.8%
Very Conservative 12.0%
Libertarian 21.1%
Rent control leads to housing shortages.
Progressive 79.2%
Liberal 70.9%
Moderate 52.4%
Conservative 23.0%
Very Conservative 14.1%
Libertarian 15.7%
A company with the largest market share is a monopoly.
Progressive 30.8%
Liberal 27.9%
Moderate 26.0%
Conservative 12.5%
Very Conservative 13.5%
Libertarian 6.8%
Third-world workers working for American companies overseas are being exploited.
Progressive 83.0%
Liberal 77.0%
Moderate 60.7%
Conservative 30.9%
Very Conservative 25.9%
Libertarian 29.3%
Free trade leads to unemployment.
Progressive 60.8%
Liberal 44.6%
Moderate 40.0%
Conservative 20.9%
Very Conservative 16.1%
Libertarian 19.5%
Minimum wage laws raise unemployment.
Progressive 92.5%
Liberal 86.3%
Moderate 64.8%
Conservative 17.5%
Very Conservative 11.3%
Libertarian 17.6%
—–
Source:
Pdf page 11
http://econjwatch.org/file_download/432/ButurovicKleinMay2010.pdf
and
http://econjwatch.org/articles/economic-enlightenment-in-relation-to-college-going-ideology-and-other-variables-a-zogby-survey-of-americans
.
Here are the results from the Zogby Survey referenced in the articles and paper:
ECONOMIC ENLIGHTENMENT
Table 2. Percentage INCORRECT by Ideology (using twopoint
scale for question responses).
Restrictions on housing development make housing less affordable.
Progressive 67.6%
Liberal 60.1%
Moderate 45.9%
Conservative 22.3%
Very Conservative 17.6%
Libertarian 15.7%
Mandatory licensing of professional services increases the prices of those services.
Progressive 51.3%
Liberal 50.0%
Moderate 40.7%
Conservative 25.6%
Very Conservative 19.1%
Libertarian 12.7%
Overall, the standard of living is higher today than it was 30 years ago.
Progressive 61.0%
Liberal 52.0%
Moderate 36.9%
Conservative 13.8%
Very Conservative 12.0%
Libertarian 21.1%
Rent control leads to housing shortages.
Progressive 79.2%
Liberal 70.9%
Moderate 52.4%
Conservative 23.0%
Very Conservative 14.1%
Libertarian 15.7%
A company with the largest market share is a monopoly.
Progressive 30.8%
Liberal 27.9%
Moderate 26.0%
Conservative 12.5%
Very Conservative 13.5%
Libertarian 6.8%
Third-world workers working for American companies overseas are being exploited.
Progressive 83.0%
Liberal 77.0%
Moderate 60.7%
Conservative 30.9%
Very Conservative 25.9%
Libertarian 29.3%
Free trade leads to unemployment.
Progressive 60.8%
Liberal 44.6%
Moderate 40.0%
Conservative 20.9%
Very Conservative 16.1%
Libertarian 19.5%
Minimum wage laws raise unemployment.
Progressive 92.5%
Liberal 86.3%
Moderate 64.8%
Conservative 17.5%
Very Conservative 11.3%
Libertarian 17.6%
—–
Source:
Pdf page 11
http://econjwatch.org/file_download/432/ButurovicKleinMay2010.pdf
and
http://econjwatch.org/articles/economic-enlightenment-in-relation-to-college-going-ideology-and-other-variables-a-zogby-survey-of-americans
.
Here are the results from the Zogby Survey referenced in the articles and paper:
ECONOMIC ENLIGHTENMENT
Table 2. Percentage INCORRECT by Ideology (using two-point scale for question responses).
Restrictions on housing development make housing less affordable.
Progressive 67.6%
Liberal 60.1%
Moderate 45.9%
Conservative 22.3%
Very Conservative 17.6%
Libertarian 15.7%
Mandatory licensing of professional services increases the prices of those services.
Progressive 51.3%
Liberal 50.0%
Moderate 40.7%
Conservative 25.6%
Very Conservative 19.1%
Libertarian 12.7%
Overall, the standard of living is higher today than it was 30 years ago.
Progressive 61.0%
Liberal 52.0%
Moderate 36.9%
Conservative 13.8%
Very Conservative 12.0%
Libertarian 21.1%
Rent control leads to housing shortages.
Progressive 79.2%
Liberal 70.9%
Moderate 52.4%
Conservative 23.0%
Very Conservative 14.1%
Libertarian 15.7%
A company with the largest market share is a monopoly.
Progressive 30.8%
Liberal 27.9%
Moderate 26.0%
Conservative 12.5%
Very Conservative 13.5%
Libertarian 6.8%
Third-world workers working for American companies overseas are being exploited.
Progressive 83.0%
Liberal 77.0%
Moderate 60.7%
Conservative 30.9%
Very Conservative 25.9%
Libertarian 29.3%
Free trade leads to unemployment.
Progressive 60.8%
Liberal 44.6%
Moderate 40.0%
Conservative 20.9%
Very Conservative 16.1%
Libertarian 19.5%
Minimum wage laws raise unemployment.
Progressive 92.5%
Liberal 86.3%
Moderate 64.8%
Conservative 17.5%
Very Conservative 11.3%
Libertarian 17.6%
—–
Source:
Pdf page 11
http://econjwatch.org/file_download/432/ButurovicKleinMay2010.pdf
and
http://econjwatch.org/articles/economic-enlightenment-in-relation-to-college-going-ideology-and-other-variables-a-zogby-survey-of-americans
.
That is because “progressives” either are “utopian” or “national socialist”. For the utopians, it is about equalizing power, for the national socialists, who believe economics is a intellectual fantasy outside the real results originated from “traditional” hierarchy. Generally progressives are “mix” between the two with the extremes(60’s counterculture, NAZISM being the far sided examples) on “economic” issues.
Libertarians to a national socialist are a intellectual fantasy who dissolve the function of the state to the merchant caste. I can see libertarians ending up as the communists in national socialist progoganda. To the utopians, libertarians are functioning as political shrills for the merchant caste to pillage the laboring classes. They see them as rich slobs who have no respect for the laboring class(which isn’t always the case).
That is because “progressives” either are “utopian” or “national socialist”. For the utopians, it is about equalizing power, for the national socialists, who believe economics is a intellectual fantasy outside the real results originated from “traditional” hierarchy. Generally progressives are “mix” between the two with the extremes(60’s counterculture, NAZISM being the far sided examples) on “economic” issues.
Libertarians to a national socialist are a intellectual fantasy who dissolve the function of the state to the merchant caste. I can see libertarians ending up as the communists in national socialist progoganda. To the utopians, libertarians are functioning as political shrills for the merchant caste to pillage the laboring classes. They see them as rich slobs who have no respect for the laboring class(which isn’t always the case).
That is because “progressives” either are “utopian” or “national socialist”. For the utopians, it is about equalizing power, for the national socialists, who believe economics is a intellectual fantasy outside the real results originated from “traditional” hierarchy. Generally progressives are “mix” between the two with the extremes(60’s counterculture, NAZISM being the far sided examples) on “economic” issues.
Libertarians to a national socialist are a intellectual fantasy who dissolve the function of the state to the merchant caste. I can see libertarians ending up as the communists in national socialist progoganda. To the utopians, libertarians are functioning as political shrills for the merchant caste to pillage the laboring classes. They see them as rich slobs who have no respect for the laboring class(which isn’t always the case).
Wow. That’s quite the mix of scare quotes and stereotyped thinking. High marks for originality, though. I don’t believe I’ve ever seen anyone call the Nazis – who outlawed “trade unions”, frex -“progressives.”
OTOH, You did come pretty close to “nailing” the libertarians.
Cheers!
JzB
Another issue–and one familiar to anyone who has taught–is that people often answer the wrong question. That is, they read a question and then decide to answer a different question (not the one given). In my experience, rent control hasn’t affected my own rent payments–my rents rose (and never fell) depending on whether or not there were a lot of people who could pay that rent. Anybody who has lived in a gentrifying neighborhood or in an area undergoing an economic boom understands this So does rent control (or housing restrictions) influence prices? Sure. But is it why my rents went up 15% one year and 10% several other times? No.
Like this comment demonstrates, people will answer the question they think they’re reading, not the one that’s offered. Sometimes we get lucky and they coincide.
Mike the Mad Biologist: “Like this comment demonstrates, people will answer the question they think they’re reading, not the one that’s offered. Sometimes we get lucky and they coincide.”
Great point, Mike! 🙂
For whatever reasons, survey questions are very sensitive to wording. Even questions that seem to ask the same thing, according to dictionary definitions, can generate quite different responses.
Why the assumption that their assumptions regarding “economic enlightenment” are valid? From the original paper:
“We choose to confine our report to the eight
questions that most reliably gauge economic enlightenment.
The statements of the eight questions used are the following:
1. Restrictions on housing development make housing less affordable.
• Unenlightened: Disagree
2. Mandatory licensing of professional services increases the prices of those
services.
• Unenlightened: Disagree
3. Overall, the standard of living is higher today than it was 30 years ago.
• Unenlightened: Disagree
4. Rent control leads to housing shortages.
• Unenlightened: Disagree
5. A company with the largest market share is a monopoly.
• Unenlightened: Agree
6. Third-world workers working for American companies overseas are being
exploited.
• Unenlightened: Agree
7. Free trade leads to unemployment.
• Unenlightened: Agree
8. Minimum wage laws raise unemployment.
• Unenlightened: Disagree
We think it is reasonable to maintain that if a respondent disagrees with the
statement “Restrictions on housing development make housing less affordable,”
the respondent betrays a lack of economic enlightenment.”
“We think it is reasonable…” Is not much of a measure of validity for what is the heart of their sutdy, from which the authors procede to make a topn and a hlf of additional assumptions. Sounds a lot like an economics study, one assumption following another as support for the first.
They outlawed trade unions but backed unions that backed the party. Pretty understandable. You have to understand, unions were also considered no longer “necessary” after the NAZIS came to power as they got rid of the need for them.
Alot of leftists get that screwed up. It is why I look for the progressives when I look for hints of national socialism. It is they, who are most likely to develope into one and build the “movement”. The so called “conservatives” of today are nothing more than neo-liberals with their calvinist heritage. NAZIS hated calvinists………as do the progressives.
When the “guilty white liberal” sees their middle class upbringing being destroyed, they will lose the guilt and go to extreme measures to shore up their wealth. Neo-liberal policies would give it all to the MNC’s and foreign countries.
You will see Teachers,Wal-Mart Managers,Liberal Arts Majors,Salesman,Scientists ete ete all walking in march together against the “infidels” the poor negro,the rich banker, the decadent executive. Businesses that don’t support the “revolution” will be crushed, others mysteriously dying and the new bosses going with a completely different business plan. The war on terror stuff would end and the war on “developing countries”(AKA BRIC) would begin. It would bridge the differences in America and lead to a religious conversion of unbelievable heights.
by Bruce (who still hasn’t figured out how to get rid of this ‘My Site” crap)
I can sum up those three findings in four words: ‘Most progressives are not glibertarians’.
There is a basic demand for subsistence, for shelter, for heart surgery. And an ability to pay for all that based on wages. Meaning that the prices for the former are not infinitely elastic, the grocer, the land lord, the surgeon will have to adjust to local conditions and local margins or else exit the entire market.
That is prices don’t determine demand, demand combined with ability to pay determine prices, and this is more true as the demand is more basic. There is a societal demand for basic subsistence and their are societal barriers to entry to that market, but that does not mean that prices are infinitely elastic to those barriers, that the price of complying with basic food safety rules simply gets passed through, or the cost of getting your prep cooks set up with a health card, that is simple libertarian fetishism, they take effects that do in fact operate at the margin and insist they are not only central but so central that only morons would not concede the point.
See Bryan Caplan and “The Myth of the Rational Voter” where he takes this argument to absurdist ends. ‘What drug safety might have societal benefits?!? Let’s take away your voting rights, you clearly are an idiot!!”
Groceries are more expensive in the inner city than in the suburbs. And in many instances so is housing, someone who is down and out and living in Single Residence Occupancy (i.e. fleabag hotel) may be paying significantly more on a monthly basis than the cost of an apartment in the same neighborhood, and in general both have a hell of a lot more to do with pricing power than vendor cost.
To oversimplify perhaps; glibertarian economic theory sees three mechanisms interacting in ‘supply’, ‘demand’, and ‘price’ and simply ignore the fourth mechanism of ‘pricing power’, even as they readily concede the principle of ‘maximizing self-interest’ (‘greed is good’) which by nature will drive market participants to leverage whatever pricing power they have. That external authorities can control that fourth mechanism without killing the interaction of the first three just seems alien to them when in fact it is the most natural thing in the world, being the governments inherent police power to control other power imbalances (i.e. ‘give me your wallet’)
Mike
not sure we should call it “lucky.” in the first place people’s brains are wired to respond to the implication (according to their theory of everything) for good or ill. in the second place, it’s probably better that way than we should let our society be designed by the experts, of either the right or the left.
The results show that progressives are ignorant on the economic fundamentals. My take it that facts and reality don’t line up the way they wish it would so they make their own reality, one that is more agreeable to their ideology.
Mysite,
Prices are determined by preferences, technology, total resources, and how these things are distributed between individuals.
The results show that progressives are ignorant on the economic fundamentals. My take is that the facts and reality don’t line up the way they wish they would so they make their own reality, one that is more agreeable to their ideology.
Can we get a little attention to this statement from the original study?
“We choose to confine our report to the eight questions that most reliably gauge economic enlightenment.”
“Most reliably gauge economic enlightenment”? On the basis of what scale of enlightenment?
Look especially at items 6, 7, and 8. Where is the validity for the authors’ assumption of the “enlightened” (correct?) answer?
Jack,
I saw this line as a key point:
Those identifying as “libertarian” and “very conservative” were the most knowledgeable about basic economics. Those identifying as “Progressive” and “Liberal” were the worst.
I see a lack of economic knowledge here from the liberals. An example is the social security trust fund. Given the survey’s findings it might just be too much to expect a liberal to understand that a bond with benefit and obligations between one government agency to another is not an arms length transaction and does not represent real purchasing power like for instance portfolio of bonds from other countries such as China, Japan, and Germany. I always thought the liberals were spinning and misleading but this survey suggests that they just don’t know any better.
Cardiff,
“…not represent real purchasing power like for instance portfolio of bonds from other countries”….such as czarist Russia? Feel free to sign over your SS benefits to me since they are not “real purchasing power”.
Two things:
By giving the respondents the ability to somewhat agree or somewhat disagree, the poll encourages them to think about the question in nuanced terms. However, the analysis does not leave room for nuance.
The authors note that the questions focus on liberal policies that conflict with their accepted economic enlightenment, but they fail to note that the policies all relate to addressing market failures. This seems to me to show a bias – believing that there are no market failures.
Cardiff
the most ignorant person here appears to be you. i would grant that a lot of “liberals” don’t know much about “economics.” especially the poor. but they do know something about reality. meanwhile you can sit here and read the comments and fail utterly to suspect there might be something wrong with the “study.” not to say the “economics.”
meanwhile the Social Security bonds don’t have a damn thing to do with arms length transactions, but that is a whole area of reality it doesn’t look like you will ever get to understand.
for anyone else who cares, Social Security is SUPPOSD to avoid the uncertainties of the marketplace. What interest, or price, the “government” or “Social Security” (as a legally separate entity) could get is of no particular interest to the people who are “buying” Social Security. They are buying an insurance product, and what they want is security, not a tenth of a percent difference in interest or profit on bond sales. All the SS bonds do is provide a “safe” way to store a little extra money from Social Security to bridge expected “bad times.” The interest is merely there to more or less track the change in the value of money over time. The rate is set by the prevailing market rate at the time the bond is issued.
Cardiff
the most ignorant person here appears to be you. i would grant that a lot of “liberals” don’t know much about “economics.” especially the poor. but they do know something about reality. meanwhile you can sit here and read the comments and fail utterly to suspect there might be something wrong with the “study.” not to say the “economics.”
meanwhile the Social Security bonds don’t have a damn thing to do with arms length transactions, but that is a whole area of reality it doesn’t look like you will ever get to understand.
for anyone else who cares, Social Security is SUPPOSD to avoid the uncertainties of the marketplace. What interest, or price, the “government” or “Social Security” (as a legally separate entity) could get is of no particular interest to the people who are “buying” Social Security. They are buying an insurance product, and what they want is security, not a tenth of a percent difference in interest or profit on bond sales. All the SS bonds do is provide a “safe” way to store a little extra money from Social Security to bridge expected “bad times.” The interest is merely there to more or less track the change in the value of money over time. The rate is set by the prevailing market rate at the time the bond is issued.
the double post seems to be the way js-kit deals with a reply to a comment that crosses the page boundary. trying to delete the second post often deletes both copies. i am too lazy to fight with it. so if you get to the second copy of the above post, feel free to skip it.
Bob,
Get with the program. The issue is not the benefits but if the social security trust fund helps to pay to the benefits. Since they don’t those that think it does previously I though were misinformed or dishonest. However, the survey suggest they are probably lacking economic literacy.
Coberly,
Your analogy fails for this reason. With a bond you loan money to an enterprise and they invest the money in plant and equipment. This equipment generates cash and the enterprise uses this cash to pay you back. In doing this you allow them to start or expand their business and they provide you a means to convert current cash to future purchasing power earning more than what you have had you left it in cash. This is simple finance 101. Howerver, the social security trust fund resulted from the overcharge of current social security taxes. I know something about this because I have been paying them for the last 30+ years. The funds were used to finance current government consumption. The money is gone and we have nothing to show for it, no plant, no equipment, and given the national debt no increased capacity to pay future benefits. The fund is a total failure.
So I think given the results of the survey what we have are people receptive to dishonest arguments because of their ignorance of basic economic concepts and reasoning skills.
Oh that’s impressive. Among the ignorant progressives who get the wrong answer on the last question you will find David Card who also won a Clark medal. Actually, being Card he wouldn’t say that the claim is false but rather that more data are needed to answer the question.
The minimum wage question is one where economics 101 (first semester) gives a clear answer and in the second semester it is explained that the first semester assumption of perfect competition was really used to get to the answer, and that, with imperfect competition, minimum wage legislation can lead to higher employment and lower unemployment.
Cardiff: “Howerver, the social security trust fund resulted from the overcharge of current social security taxes. I know something about this because I have been paying them for the last 30+ years. The funds were used to finance current government consumption. The money is gone and we have nothing to show for it, no plant, no equipment, and given the national debt no increased capacity to pay future benefits. The fund is a total failure.”
The fund is a bookkeeping fiction, convenient or inconvenient depending on your point of view.
Cardiff:”I saw this line as a key point:”
Very interesting, but it has little to do with the question I posed. i may be missing the point of the post, but there are two posts now reflecting on the study done by Zeljka Buturovic and Dan Klein and appearing in “Econ Journal Watch (a peer-reviewed journal of economics).” That study seems to start off on a totally unproven premise. As noted above, “Most reliably gauge economic enlightenment”? On the basis of what scale of enlightenment?” The authors offered no support for that premise other than they seem to intuitively believe it to be true. That’s one hell of an approach to scientific inquiry. Given the lack of any measure of validity for their basic premise, why is the study generating such discussion of its presumed results?
Min: This is exactly where progressives fall into the trap: conceding the bookkeeping to the conservatives’ view of things.
The federal government budget is not in any way similar to a business or a household budget. The federal government need not tax or borrow to fund its spending programs and operation.
If these points were defended the argument about social security, for example, turns into one of choices (which is what it is in reality) rather than affordability.
Cardiff
do you regard the ‘war bonds’ that your grandparents bought as “having nothing to show for them”?
the wonderful thing about your ignorance is that you are able to recite it with a straight face and the light of inspiration never goes on.
there are two ways the money the government borrowed and spend counts as investment:
first, the money was spent, arguably, on doing things that makes the country stronger, making it easier for you to make more money in the better future.
second, the money was effectively lent to the high end taxpayers who used it to invest in their own enterprises, directly making the country richer. that’s how low taxes are supposed to pay for themselves by growing the economy.
none of this is necessarily true, but at least the second point conforms to your friends ideology, when they bother to be consistent. and the first is essentially the basic reason why anyone bothers to have a government in the first place, with taxes, whether the taxes are used directly to buy present needs, or indirctly by “borrowing” in the form of issuing bonds.
the tragic fact is that you have no idea what i am talking about.
jeff
you may or may not be right. but you are a little advanced for most of us, let alone cardiff, who can’t even get the idea of basic bookkeeping and how nations finance their needs straight. but that’s nor surprising since it doesn’t appear in his talking poiints newsletter, and was left out of his econ 101 because it was an truth too inconvenient for his professor who was hoping to get a job at a think tank.
Cardiff
get with YOUR program?
hell, that’s the tragedy we are trying to save our country from.
the social security trust fund is money borrowed from payroll tax payers and lent to the general fund.
this eases pressure on the general fund and allows the payroll tax payers to prepay a bit of their reitrement end ease pressure on the following generation which was at a numerical disadvantage. there is nothing here that could not be done in the ordinary course of business by an ordinary company. it is clear you don’t know a damn thing about ordinary business finance, much less government finance.