I try to keep this blog as free from politics as possible, which may be hard to believe given its title refers to the political spectrum, but nonetheless I do try. Again having said that, a motivation to set this up was friends of mine who are Conservative voters suggesting to me it was the "Christian" thing to do, much to my consternation.
I think the main reason I try and keep away from politics and government action is that I don't think that governments should be forcing people to do "Christian" things; so I don't think abortion should be outlawed, and I think all other government actions that discriminate unfairly against people made in God's image is wrong.
I believe Christians vote Conservative because they believe that small governments better enable people to get on in life; bigger governments stifle effort and creativity, crowding out small business and entrepreneurship. But this involves a healthy level of confidence in market mechanisms to deliver, and I believe too high a view of the goodness of man - particularly too high for Christians aware of how sinful man is.
Why do I say this when from Adam Smith onwards, economists have espoused the virtues of the market in mitigating man's own greed and enabling it to contribute towards the greater good? Because there are plenty of situations in which the price mechanism fails. It doesn't need government intervention for the price mechanism to stop doing its job of revealing relative scarcity and relative abundance, it just needs unscrupulous men and women.
I've mentioned in previous posts how a "nice equilibrium" where everyone does a good honest job and hence everyone trusts everyone to do a good honest job - the incentive is there for someone to deviate and do a bad job, and get out while they can (and even if they fail, their actions will succeed in destroying the good equilibrium since now people know with non-zero probability there are some bad people about).
All this by means of an introduction to what I was planning to write about - recent Tory announcements regarding the economy. In particular repeated comments on the 50% tax band, and also recent talk about abolishing all employment protection. The bottom line of these is a trust that despite bosses being unscrupulous, the end product is a much better, clean, shining functioning economy because of competition - the bad bosses, the nasty ones, will be weeded out and left on the scrapheap if they don't become nice shiny bosses.
If I sound a little sarcastic there, it's because I don't buy it. Those proposing it probably think it has basic economics on side, but it may do: Very classical economics that hasn't considered much recent economic study into areas such as industrial organisation, game theory and behavioural economics. There's no point in me repeating what Chris Dillow writes about much more elegantly, but if you want some demolitions, here are a couple.
Now the question is, as Christians, what should we be doing? James 1:27 says "Religion that God our Father accepts as pure and faultless is this: to look after orphans and widows in their distress and to keep oneself from being polluted by the world."
I seriously wonder how scrapping the 50% tax rate on those earning above £150k (polluted by the world?!), and stripping away all employment rights of workers (usually pretty low paid - widows and orphans in their disress?!), counts here. The hardest of hard Tories would say "Charity should do the hard work", yet this again ignores some basic economics: If there's a positive externality (net social benefits greater than net private ones) the market (charity) will underprovide it. As was evident before the Welfare state.
Of course, I'm proposing little positive in this post, just getting some things off my chest. The main one being this idea that a small government is what we need, and that it's somehow more Christian, if that were possible.
Showing posts with label state intervention. Show all posts
Showing posts with label state intervention. Show all posts
Friday, October 28, 2011
Executive Pay
Apparently, it's up 50%.
As always, Chris Dillow has something interesting to say about this from a left-of-centre perspective.
What do I think as a Christian, and someone who leans left of centre (but not all that much to the left)? Is it immoral that folk get paid the marginal product? Nope, but then the question is whether they are being paid their marginal product, and that's something that Chris pushes at in his blog.
Your libertarian, right-leaning person (Christian or otherwise) will say that we shouldn't stand in the way of this: The market is determining the right level of remuneration for these individuals, yet is it? Is the price mechanism really at work here?
Basic economic theory says that as well as wages being determined by the marginal product of the worker, it also points to the existence of economic rents that can be exploited by either the principal (employer) or agent (employee) in any given wage situation - there is wage bargaining going on. Right-wingers of an extreme form would say that there exists no power without government, but executives certainly have some form of power to extract the kinds of rents they extract - i.e. the kind of pay they manage to get, which seems to be entirely independent of their performance (again see Chris's blog linked above).
Funnily enough though, I think the solution to the problem is to free markets a little bit more. From my limited understanding, the shareholding structures of big companies is skewed in favour of larger investors (which are usually institutional investors), and these large investors do not necessarily exert the kind of influence that might be hoped for. If instead legal structures were such that the voices of small investors were given more say, then we'd certainly see more shareholder activism, which might not be a bad thing in helping bring companies more in line with social marginal costs and benefits rather than just private marginal costs and benefits.
As always, Chris Dillow has something interesting to say about this from a left-of-centre perspective.
What do I think as a Christian, and someone who leans left of centre (but not all that much to the left)? Is it immoral that folk get paid the marginal product? Nope, but then the question is whether they are being paid their marginal product, and that's something that Chris pushes at in his blog.
Your libertarian, right-leaning person (Christian or otherwise) will say that we shouldn't stand in the way of this: The market is determining the right level of remuneration for these individuals, yet is it? Is the price mechanism really at work here?
Basic economic theory says that as well as wages being determined by the marginal product of the worker, it also points to the existence of economic rents that can be exploited by either the principal (employer) or agent (employee) in any given wage situation - there is wage bargaining going on. Right-wingers of an extreme form would say that there exists no power without government, but executives certainly have some form of power to extract the kinds of rents they extract - i.e. the kind of pay they manage to get, which seems to be entirely independent of their performance (again see Chris's blog linked above).
Funnily enough though, I think the solution to the problem is to free markets a little bit more. From my limited understanding, the shareholding structures of big companies is skewed in favour of larger investors (which are usually institutional investors), and these large investors do not necessarily exert the kind of influence that might be hoped for. If instead legal structures were such that the voices of small investors were given more say, then we'd certainly see more shareholder activism, which might not be a bad thing in helping bring companies more in line with social marginal costs and benefits rather than just private marginal costs and benefits.
Friday, October 29, 2010
Whose Liberty?
I was just reading one of the n-million letters a US libertarian economist Don Bordreaux fires off each day/week which as usual has some dig at something someone has said somewhere in the US media.
The linked letter basically says certain liberals oppose property rights by advocating things like nationalisation of industry or, presumably, any kind of government intervention since that is predicated on taxation which is coercion.
I think this is the starting point for many Christians who stand on the right of the spectrum (although not necessarily the Tory Christians I know, I'm thinking people like Cramner and other libertarians I know). Taxation is coercion and we should thus oppose it as Christians because it denies those from whom the taxes are taken the freedom to decide for themselves what they do with that money.
A tiny part of me is sympathetic to that view. Very tiny though, because my real concern is: Whose liberty are we protecting by stopping taxation on more affluent people in order to fund some kind of state-led action of one form or another? Are we protecting the downtrodden employee who really has absolutely no "choice" about what to do because there are no other employers around should he quit his job? What freedom does this person have if there are no labour laws and regulations (that are enforced) keeping checks and balances on what employers can and cannot do? Particularly if, should he decide to quit and try to look for another job, there is no safety net for him and his family to fall into should he not be able to find another job instantaneously?
So do we by having some state intervention in the mechanics of labour markets protect the liberty of many people at the expense of the liberty of others?
The linked letter basically says certain liberals oppose property rights by advocating things like nationalisation of industry or, presumably, any kind of government intervention since that is predicated on taxation which is coercion.
I think this is the starting point for many Christians who stand on the right of the spectrum (although not necessarily the Tory Christians I know, I'm thinking people like Cramner and other libertarians I know). Taxation is coercion and we should thus oppose it as Christians because it denies those from whom the taxes are taken the freedom to decide for themselves what they do with that money.
A tiny part of me is sympathetic to that view. Very tiny though, because my real concern is: Whose liberty are we protecting by stopping taxation on more affluent people in order to fund some kind of state-led action of one form or another? Are we protecting the downtrodden employee who really has absolutely no "choice" about what to do because there are no other employers around should he quit his job? What freedom does this person have if there are no labour laws and regulations (that are enforced) keeping checks and balances on what employers can and cannot do? Particularly if, should he decide to quit and try to look for another job, there is no safety net for him and his family to fall into should he not be able to find another job instantaneously?
So do we by having some state intervention in the mechanics of labour markets protect the liberty of many people at the expense of the liberty of others?
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