Politics Against Economics—Bet On Economics

https://grantcoulson.files.wordpress.com/2014/04/incentiveseverywherepicturecorrect1.jpg?w=444&h=288

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

    Farewell to Eli Wallach, an actor active into his 90s. Mr. Wallach’s last appearance was in 2010, when he was 93 or 94. Good actor.

    Today we see an example of why it’s difficult to be a psychologist or economist. Both disciplines have laws which are counter-intuitive and people have so much faith in their intuition that little else matters. In the passage below, the author Burton Abrams, discusses public and private wealth in health care. The conclusions are counter-intuitive, but inevitable.

The big difference between private and public wealth is that private wealth has real assets behind it— assets that further economic growth and development. Public wealth has no real assets behind it, merely the promise to use the power of government to tax people in the future. Our pay-as-you-go systems have led to an increase in national consumption, earlier retirement decisions, and a decapitalization in society— a loss of productive assets. If our pay-as-you-go Medicare and Social Security had been fully funded, we would now have trillions of dollars invested in China, not the reverse. How did all this happen? Politicians suffering from immediosis (see Introduction) just did politician things. They couldn’t keep their hands out of the cookie jar. They provided and continue to provide unwarranted medical benefits to current retired voters and kick the burden of taxation down the road to future voters and future politicians. They merely follow the Golden Rule of politics: provide benefits now, costs later.

   Abrams, Burton A (2013-10-01). The Terrible 10: A Century of Economic Folly (Kindle Locations 1679-1683). Independent Institute. Kindle Edition.

    In this case, paying for medical care can be the result of saving–which is real capital, or taxes in which current taxpayers pay out of current cash flow. If others pay for anything, the tendency is for over use. I see this frequently in our health care system.

    Immediosis is the political rule that means if you can get immediate political benefits, the long-term consequences are irrelevant. Alas, these consequences will be felt increasingly. One that is occurring is the continuing decline in the standard of living. Intuition, anyone?

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies

 

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