Why every state should be a welfare state.

This isn't a clever question. Competing private firms are typically ideal (but not always) when we're referring to a private good. We're not here. We're referring to a public good. That means, without question, the good is underprovided.

The application of public goods necessarily changes our understanding of how the aggregate demand is formed. That will also lead to uncertainty over the individual's willingness to pay. Provision at zero marginal cost will encourage a desire to overstate their desire for it. Provision at positive marginal cost will encourage free riding and an understatement of their desire for it. However, as we remarked earlier, government provision will (due to the nature of the median voter) also fail to deliver optimality. We've seen that, for example, with the retrenchment hypothesis. In general, we're therefore only talking about a reduction in economic inefficiency (rather than complete removal of one source). There will then only be specific circumstances where over-provision is a problem (e.g. a neoclassical analysis into the military sector will focus on the public good element, but a liberal political economy approach will describe how influence costs inflate the military burden through the military industrial complex).

Those understanding the complexities involved in good provision will acknowledge all of that. Here, however, we have non-economic rant with only one aim: ignoring economic analysis in order to peddle a hypocrisy packed full of cliché.

You stated "poverty was declining in the US in the 50s and stopped in the mid-60s". It didn't. We see how far you will go to misrepresent the empirical evidence.

 

Arthur C. Pigou (who the tax is named after), expresses concern that it is difficult to determine the exact cost for negative externalities.

Dennis Carlton and Glenn Loury add in the complexity as the number of firms in the market change requires changing the tax rate.

Don Fullerton and Gilbert E. Metcalf see the resulting increase in cost, will reduce production, forcing costs higher, allowing higher than normal profits.

I see a significant flaw in a Pigovian tax. Cigarettes are taxed at a high enough rate to pay for their negative externality (the impact on health care costs). The problem is those taxes don't go to fund that health care. The market isn't "corrected".

 

No, we can show mathematically that more of X would lead to greater output. That's it, not whether everyone else is happier, not that they got the color of the thing they wanted, only that output is increased.

And that's why we're still not, and clearly may never have a conversation about economics. Your insistence that we ignore text book definitions, or worse redefining them to suit your argument is a roadblock to discourse.

I read the rest of what you wrote but I don't see any point in responding anymore. We're trying to have a conversation about football and you stamp your feet and insist that intentional grounding doesn't exist. So yea, eventually I'm stuck just shrugging my shoulders and walking away.

I think a lot of you are hung up on the, "Ok, now what.." portion. Just because market failure exists doesn't necessarily mean that government needs to step in, they may, some people may want that, it may be desirable, but it's not a requirement. All it means is that if we are given a basket of stuff could we rearrange those things in a way that is more efficient or leads to greater output. There's no morality, no opinions, just math.

I'll try a simple metaphor again. Two people live on an island, they both want a well. Neither of them have enough resources on their own to build it so instead both build their own desalinization apparatus. Objectively, we can say that if we took resources from them both and built the well that they'd both be better off, especially when less resources was required to build the well than to build the two desalinization apparatuses. Is it morally right to do so? Maybe, maybe not, that's a subjective question, that they're situation is objectively improved by doing so isn't disputable.

I'm not sure if I'm doing a poor job of explaining this or if there's so other motivation for wanting to avoid understanding. In either case, perhaps someone else can do a better job than me: http://www.econtalk.org/archives/2009/12/winston_on_mark.html

The podcast above is an interview with Clifford Winston about his book Market Failure vs. Government Failure the first ~10 minutes or so does an excellent job of outlining what is market failure as traditionally understood.

Here's another as well: http://www.econtalk.org/archives/2007/10/boudreaux_on_ma.html this time a discussion between two self described libertarian economists.

Hope you enjoy!

 

Math. It's an objective evaluation.

Say we have two companies, each want a road from the town to their business, their businesses are next door to one another. They each construct their own road with their own resources. If instead we took a bit from each and built one road with less resources, they are objectively better off, they have more stuff and both got what they wanted. Whether it's moral to do so is irrelevant, that's subjective, that in terms of resources and goods their better off is objective.

 

Its not particularly 'taxing', as shown by the fuel tax example. The only empirical problem is how we can control for the value of lives. A more general problem is the potential bargaining post-tax (which you'd be referring to if you were managing to understand the Coase Theorem

A tax does not have to be earmarked. Its just convenient as it reduces the chances of revenue raising inefficiency (whereby a tax is deliberately increased above what is consistent with internalising the externality)

 

Can you provide an example of a public good with zero marginal cost?

 

The value of having one's own road versus having a shared road is subjective. You cannot know another person's subjective valuation of one versus the other. You are applying your subjective values to another person and calling it objective.

 

No subjectivity, we don't care who they are or how they feel. We only know that they both wanted a thing and got the thing using less resources than if they'd each done it themselves, in terms of resources used and what is provided we can objectively say they're better off.

 

They didn't get the same thing.

They wanted their own road. You gave them a road they must share with others. You don't know their subjective values for these two different things, so you have no way of objectively measuring the effect of your intervention.

 

No, a means to get people from the town to their business is all either of them cared about.

That's irrelevant though, it doesn't matter how much they value it, that's subjective. That we got a similar (whether it's better or worse is also not relevant) result with less resources is all that matters.

 

How are you able to know what other people care about?

Ok, so you consider building two roads instead of one is a market failure. Would it then be accurate to say that two neighbors each owning their own lawnmower would also be a market failure?

 

I don't know, can't know and it doesn't make any difference.

No. The definition has been the same since the beginning of this conversation:

Market failure is a concept within economic theory describing when the allocation of goods and services by a free market is not efficient. That is, there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off.

Efficient also has a definition that hasn't changed:

In economics, the term economic efficiency refers to the use of resources so as to maximize the production of goods and services.

No, the market for mowers is sufficiently competitive, and there's no issues with information asymmetry. The market allocates mowers in the most efficient manner.

 

But it can be proven mathematically that we can save the cost of one mower if we bought a single mower for the two homeowners. We can make them better off by having them share one mower, so it would seem that a market failure must exist.

 

And then they couldn't mow at the same time, so your arrangement objectively makes one of them worse off and therefore doesn't meet the criteria.

 

The same goes your arrangement of replacing two roads with one single road. They couldn't use the road at the same time, so one of them is objectively made worse off and therefore doesn't meet the criteria.

 

Quit being obtuse, this is a stupid comment and you know it, of course more than one car can be on a road at a time.

 

If company A is sending its trucks to town, and company B is bringing their trucks back FROM town, there's going to be quite a problem. Someone is DEFINITELY going to end up worse off.

 

Here's a fun fact: Two cars can go down a road in the opposite direction at the same (*)(*)(*)(*)ing time, in case you hadn't noticed it happens a lot.

I'm done, this is blatant intellectual bankruptcy and intentional obtuseness. Frankly I find it quite despicable.

 

You mean each company can't use both lanes like they used to before you took their individual roads away? You have made them worse off.

 

So something is a public good if it the market will underprovide it. But, again, how can we tell whether it's underproviding something. How can you tell what the optimal amount is? What's the optimal number of lighthouses for the world right now? You can't say something's a public good if the market underprovides it and the market underprovide's something if it's a public good.

The graph showed that it declined from 22% to 12% between 1959 and 1968 and since then the decline has essentially stagnated. If you prefer me to say that it stopped in around the later 60s--1968--that's fine. The point doesn't change that it declined before the modern welfare state came into effect and then stopped declining.

 

Nope, its more than that. We'd see, for example, underprovision with a positive externality. That merely reflects a distinction between private and social benefits.

You're not making any useful comment. The analysis will rest on a cost-benefit approach (e.g. a modified Samuelson's rule where marginal cost of funds and marginal rate of transformation are considered). That is rather advanced (and way too tedious to go through in depth in here). It would, however, include any distortionary effect of taxation. It would also require reference to the fiscal impact of any generated behavioural responses.

You stated that the poverty decline stopped in the mid-60s. That is a deliberate fib. It continued to decline (from the 60s and into the 70s). See here

 

If the output does not make people happier or increase there well-being relative to what could have been output, all that is being output is waste. Show me the math that debunks my claims regarding the lighthouse. Show me the formula that can objectively decide what is more valuable than something else, despite value being entirely subjective and constantly changing.

And I have done neither of those things. You keep saying I am because you don't know how to refute anything I have said. It would be like saying fairies exist simply because they have a definition.

You have made that baseless claim three times now, and it is still wrong and proves nothing.

The only one hung up on the "now what" is you. Math cannot determine what people value as wealth. Claiming it can with no explanation does not make you right.

I was never talking about what is morally right or morally wrong, ever. You just continually assume so, which is the result of your own complete failure to comprehend the points put forward. If the well is more valuable on all counts than the desalinization apparatus, there is absolutely nothing stopping the two people on the island from building the well. If they do not build the well, then they simply prefer to be in control of their own separate desalinization apparatuses. They have decided that they are better off with two desalinization devices devices than one well. It is as simple as that. If they do not build a well, they prefer something else. That something else will be more valuable and thus represent more wealth than the well because value is subjective to the two individuals on the island, not objectively determined by some other party.

You are explaining the position quite well. Defending it well, however, is not something you have done.

I understand your initial premises. Restating them will not refute the arguments that refute those premises. As of now, you have no argument in response to the notion that public goods do not exist.

 

So where is the objective method for calculating the objective quantity of "underprovision"? How many lighthouses should there be? How many lighthouses should there be? 10789? 14047? 21336?

So there's an objective way to calculate whether the optimal number of lighthouses is 9859 or 17812 or something else, but you won't explain it because it's "way too tedious to go through in depth." Well, I don't believe you that there is any such method or "approach."

I don't see the original data, but I see it claims it fell some until 1973 and then stagnated. But why should I believe the PSID over the Census Bureau? And even if I accept the PSID, all that shows is that the welfare state took a little longer to fail in its job. The 60s welfare state was still there and still continued to expand after 1973, but it didn't improve the poverty rate. While the poverty rate did improve when it didn't exist. So, again, why would it fall before it but stop falling after it if it works so well?

 

Longshot's point cuts to the heart of your road example. Two roads can carry more cars than one road, just as two lawn mowers can cut more lawns. Yet someone the former represents failure, the other success.

 

Depends on the source of the underprovision. In terms of the positive externality it would merely be a matter of estimating the external benefits. In terms of public good provision, I've already informed you that its a matter of cost-benefit analysis. It isn't a difficult analysis, merely a technical one that requires more technical analysis unsuited to a debate forum. There are bucket loads of papers that go through all of the issues, so there's no excuse for your innocence on this issue. You're simply trying a tedious tactic: asking questions which are purely on technical details in order to hide from the fact that you do not have a valid counter-argument for the existence (and impact) of public goods.

I've gone through the issues. The technical details are in controlling for possible spill-over effects (such as the impact of taxation). The analysis therefore looks at how the Samuelson's rule should be amended. The only difficulty, in terms of subjectivity, is whether we are also referring to reductions in death rates. A cost-benefit analysis would of course have to control for those saved lives and that will require some monetary value.

The Panel Study of Income Dynamics is the chosen study for longitudinal analysis into income dynamics. You'd know that if your original statement was based on knowledge of poverty trends. Again, you've merely given an untruth and assumed people would fall for it. A crass tactic.