The Failure Of Private Auditing

On this blog I often discuss market failures and the need for government action to correct them. It is necessary for regulation to keep the free market from getting too wild. But is government the right answer? Can the market not control itself? Could companies not bind together to create industry standards without government bureaucracy? Can private regulators not ensure proper standards are met without the need for state intervention? Continue reading “The Failure Of Private Auditing”

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Built To Break

There is a problem with the free market and consumerism. You see, it is based upon increasing sales as much as possible. As soon as you sell something you want that same person to buy another product from you. You could do this by competing on price or quality, or you could build the product such that it either breaks down or goes out of fashion very soon. This process, known as Planned Obsolescence, is rarely discussed but quite logical and sensible. Continue reading “Built To Break”

Do Generous Welfare Benefits Lead To High Unemployment? (Short Version)

(This is a shortened version of my last post. Essentially I shortened it, removed all the technical economic terms and put into plain English. If you want to see my sources and the evidence I base this article on then see the last post.)

It is commonly stated as fact that generous unemployment benefits leads to high unemployment. The argument is that people won’t bother getting a job if they can get paid for not working. It is often declared that there is more money on the dole than in a job and that the only problem with the unemployed is that they lack motivation. However there is little or no evidence to support this belief. Countless studies have been done without finding the supposedly large disincentive effect. In fact countries with generous welfare benefits (such as Sweden and Denmark) have on average lower unemployment. Continue reading “Do Generous Welfare Benefits Lead To High Unemployment? (Short Version)”

Do Generous Welfare Benefits Lead To High Unemployment? (Long Version)

(This was originally written as a college essay. For this reason it is 3,000 words long and contains a lot of economics terms references. It is meant as a help for anyone who wants an in-depth study of the topic with supporting facts and figures. For a short version in plain English see here. The essay was marked the best in my class of 80 students. It won the Undergraduate Award 2012 in Economics along with someone from Yale. I’m not trying to boast but I’m over the moon.)

Abstract

This paper discusses the conventional wisdom that unemployment benefits create a disincentive to work, the so-called “welfare trap”. It examines if higher benefit levels or longer benefit durations lead to higher unemployment rates. Surprisingly, it finds that the disincentive effect is negligible to non-existent. A wide range of different studies have found little or no disincentive effect. The orthodox economic view which states that workers will quit their jobs if they will receive more money from unemployment benefits has been found to be naive and unrealistic. Despite the large number of people who believe it to be true, it simply is not supported by evidence. Continue reading “Do Generous Welfare Benefits Lead To High Unemployment? (Long Version)”

The Mythical Laffer Curve

Conservatives everywhere condemn the use of tax increases for fear of the Laffer Curve. This is the idea that if taxes are too high, people will lose the incentive to work and therefore revenue will actually decrease. It is most famous for its counter-intuitive argument that a tax cut could increase revenue. Unfortunately there is little or no evidence to support this claim. History clearly shows that cutting taxes does not increase revenue. The Laffer curve is a political idea used to justify tax cuts for the rich. It is not based on sound economics.

Continue reading “The Mythical Laffer Curve”