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June 11, 2015

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Posted: 11 Jun 2015 12:06 AM PDT

'Inequality of Opportunity: Useful Policy Construct or Will o’ the Wisp?'

Posted: 10 Jun 2015 10:17 AM PDT

Can economic opportunity be separated from economic outcomes?:

Inequality of opportunity as a policy construct: ...Concluding remarks
Any attempt to separate circumstances from effort – to identify that portion of the inequality of outcomes which is a legitimate target for redistribution – is fraught with empirical and conceptual difficulties.[4] Fine-grained distinctions between inequality of opportunity and inequality of outcomes do not hold water in practice, and we are likely to greatly underestimate inequality of opportunity and hence the need for intervention.
Further, what if one person's effort becomes another person's circumstance, as when income generated through parents' effort provides a better start in life for some children? Or when freely made choices by one group of upper-income house buyers push up prices for others who may have lower incomes? Is it legitimate or is it not legitimate to intervene in this case?
These arguments support the case for generalised social protection in dimensions such as income, health and education, irrespective of whether the outcomes can be specifically attributed to circumstance or to effort.
The important questions then relate to what the best available policy instruments are for delivering this social protection, what effects they have on incentives, and how best they can be deployed. To be sure, we may make some Type I and Type II errors in doing so; we may penalize effort when we should not, and we may not fully compensate for circumstances when we should. But this is preferable to being frozen into perpetually underestimating the need for intervention by a focus on that will o' the wisp, inequality of opportunity.

'Social Sciences are Just as Important as STEM Disciplines'

Posted: 10 Jun 2015 09:48 AM PDT

Social science research "can improve our national security, create jobs and enhance our economic competitiveness":

Why social sciences are just as important as STEM disciplines, by Lance R. Collins, Washington Post: In a shortsighted effort to save money, Congress is moving ahead with a plan to cut investment in the social sciences. The America Competes Act under consideration on Capitol Hill would reauthorize funding for the National Science Foundation and other agencies that supply the financial lifeblood to engineering and the physical sciences. However, as passed by the House, the bill would cut the foundation's funding for the social sciences by about half in order to direct more money to science, technology, engineering and mathematics — the STEM disciplines.
As an engineer and an educator, I deeply appreciate our national policymakers' recognition that funding STEM research can improve our national security, create jobs and enhance our economic competitiveness. But I disagree with the notion that the social sciences are not just as important for the same reasons.
In fact, the social sciences are more important today than ever...
As Congress works its way through the reauthorization of the funding for the National Science Foundation, I urge our elected officials to pause and recognize the essential role of science — including social science —to our nation's well being.

Walmart and Wages

Posted: 10 Jun 2015 09:33 AM PDT

Paul Krugman:

Notes on Walmart and Wages (Wonkish): Walmart reports that its recent wage hike is paying off via reduced turnover, which produces cost savings that offset the direct expense of the higher wages. In other words, efficiency wage theory is vindicated. What are the political/policy implications? What follows is a slightly wonkish note, largely to myself.
Efficiency wage theory is the idea that for any of a number of reasons, employers get more out of their workers when they pay more. It could be effort, it could be morale, it could be turnover. The causes of the efficiency gain could lie in psychology, or simply in the fact that workers are less willing to risk better-paying jobs with bad behavior. ...
Or to put it differently, efficiency wages suggest right away that the invisible hand's grip on labor is a lot looser than people imagine, that wages are relatively easy to shift with social and political pressure. And this is one important reason attempts to reduce inequality can and should involve working on the distribution of market income as well as ex-post redistribution through taxes and transfers.

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