Wednesday, March 01, 2006

Society and Preferences

by Tom Bozzo

Big Questions for the morning: How do you hold together a society consisting of actors with different preferences over how society should be organized? Particularly when the distribution of the preference characteristics is weakly correlated with things like geography that might permit orderly sorting into national groups? What are the stable outcomes, if any?

1. E-mail exchange with Jeremy over the meaning of people having different "marginal utilities of income." The bigger social science research question is how do we most usefully characterize differences among agents that are relevant for economists' and sociologists' explanations of the phenomena we study.

2. Brad DeLong's excellent summary of the forces behind Paul Krugman's Monday column. (See also here and here from this blog).
Say, rather, that five things are going on:
1 The rise of a very powerful, successful, exploitative upper class.
2 Further increases in inequality as the tax and transfer system becomes less progressive.
3 Increases in risk that threaten to move middle-class families sharply downward in the wealth distribution.
4 Skill-biased technical change that sharply raises the benefits to education.
5 Holes in the safety net--the fall in the value of the minimum wage, time-limited welfare, and so forth.

3. In the FT, via Economist's View, a broadside aimed at the European welfare state courtesy of Swedish libertariana:
What, then, are the failings of the big state? The answers include: fiscal unsustainability; mediocrity of provision; slackening work effort; slowing productivity growth; resistance to economic adjustment; flight of valuable economic resources; difficulties in absorbing immigrants; and even the undermining of the family. A social system that protects people from the consequences of their own decisions is rife with moral hazard: in the long run, it changes not just behaviour but even values in a less productive direction.
(As an exercise, try stripping away the market utopian frame from that. Slacking is bad, m'kay, but isn't the provision of market work effort notionally something people should be able to choose? And on "mediocrity of provision," evidently, Euro libertarians don't fly and haven't dealt with the customer service functions of large U.S. telecom providers.)
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