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One more fantastic post! Now drop the rationality assumption and re-ask the question. Or put another way, is stupid synonym of not rational? Not so sure...
Toggle Commented Aug 28, 2012 on The party of capitalism? at Stumbling and Mumbling
Governments can be irrational too, and they often are (at least from the point of view of the well-being of its citizens, not necessarily from the point of view of the people in government). It can be leftist irrationality (too much spending at the wrong time) or rightist irrationality (austerity now). This is the best argument against regulation in general. On the other hand, there is no denying that the private sector is not always rational, and that by serving too much its self-interest, it fails to deliver the beer, bread and meat it is supposed to... In the end, it looks like it's a question of balance and compromise between liberalism and state-control. Hard to sell, and hard to apply...
Toggle Commented Apr 23, 2012 on A cost of austerity at Stumbling and Mumbling
Indeed it isn't (and this isn't even the worse example), but at least it leads to choices that are accepted by the people. And when people feel they've been fooled, with bad consequences for them, they're just able to make a reverse choice (in the case of minarets, that's a pure symbol, with little consequence for anyone). Wouldn't it be interesting to have the Greek or the Spanish vote on their fate? In Iceland, the people did, and the country is in a much better shape than European counterparts.
Political Reality is a weak excuse for failed politics. When people can really have their say, and provided they're properly informed after an open debate, they turn out to be surprisingly "reasonable". This is most obvious when seen from Switzerland where direct democracy rules about everything. Of course, not every referendum is a demonstration of public wisdom (on many of them, there is just not enough of a debate; on other ones, strong interests succeed through massive advertising or clever networking; Swiss democracy is far from perfect). But on occasions, and especially on important issues, voters may take bold decisions, sometimes in opposition to Swiss government or parliament (that are not necessarily of the same opinion). People voted for budget discipline, just as they voted liberal policies on drugs. Very often, Swiss politicians refer to Political Reality for something they consider can't be done. That's wrong. It is something they don't want to do, because they don't view it as favourable to their careers.
In Econ101, merit is measured by marginal productivity, which is in turn equivalent to wage. It is an elegant model that unfortunately reflects only part of the reality. The question asked here is whether this part is increasing or decreasing. So what makes reality different from the model? The first difference is that marginal productivity cannot always be measured, especially for a given individual in a very specific job (like CEOs for example). The second difference is that productivity is all about supply-side, while most of those examples are about demand. What is at stake is not the ability of those individuals to produce more for a fixed cost, but their ability to increase demand. Economic growth means that the need for first-necessity goods has since long been fulfilled, and that economic activity is increasingly driven by a demand for entertaining goods or services. Maybe it just turns out that silly journalists are more entertaining than serious ones, or that bad singers have some special appeal that good ones miss. Or it is just that the people have bad taste and are stupid. Whatever the reason, the model is indeed inadequate.
Toggle Commented Apr 9, 2012 on Anti-meritocracy at Stumbling and Mumbling
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Apr 9, 2012