The Most Important Lesson Of Economics

Economics is a broad and vast field comprising intricate areas that would take years to master. This makes it very hard to summarise or reduce it to a simple point. However, if there was one simple lesson that I wished everyone knew about economics, one easy sentence or sound bite that could explain the essential core to people who know nothing else about economics, it would be: “My spending is your income”. This simple point, properly understood, explains everything you need to know about the important policy issues of the economy. It doesn’t explain everything, but it explains the important parts.

My Spending Is Your Income

Continue reading “The Most Important Lesson Of Economics”

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Why Cutting Public Sector Pay Is Always a Bad Idea

At the moment the government is trying to negotiate a deal to best cut public sector wages. However, any such deal will only make the recession worse without reducing the deficit. Here is a guest blog I wrote on the topic.

Irish Student Left Online

– Robert Nielsen discusses the ongoing dispute over the Croke Park II proposals, and why cutting wages is always a bad idea.

At the moment there is a great deal of controversy over the Croke Park Deal. In essence the government is trying to cut the wages of public sector workers while the public sector unions are opposing this. Regardless of the politics of the agreement, cutting wages is bad economics. It depresses the economy, worsens the recession and doesn’t even achieve its objective of reducing the deficit. The union membership was absolutely right to reject the Croke Park Deal and the government must completely reconsider its plan of action, because the current one isn’t working.

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Conservative Logic

There is no such thing as a free lunch . . . except for free trade which makes everyone everywhere better off

It is naive and foolish to imagine there is some magic pot of gold which will make us all magically richer . . . but competition magically makes everyone richer

As Adam Smith said, the “invisible hand” of the free market ensures everyone is best off . . . even though Smith never said that about the market but rather about protectionism.

We should never rely on one-size-fits-all solutions that don’t take account of the specifics of each case . . . and cut taxes in response to every problem

The government makes everything worse . . . which is why countries like Somalia which have no government are so much better off Continue reading “Conservative Logic”

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)”

Immigrants And The Welfare State

It is common to hear people groaning about how immigrants are supposedly abusing our welfare system. There are numerous anecdotes (but never actual facts) involving immigrants being put ahead of natives. Allegedly, hordes of undeserving lazy foreigners are robbing us blind while the government stands idly by. None of this is supported by the evidence. In truth, study after study has found that do not harm the local economy but rather benefit it. There are twice as many natives (as a percentage) on welfare in Ireland as immigrants. Continue reading “Immigrants And The Welfare State”

Just Who Is Rick Santorum?

(This article was originally written for The College Tribune in January. I was anxious to talk about Santorum because I didn’t think he’d be around for much longer.)

Do you think homosexuals are destroying America? Do you think the government should stop giving money to black people? Do you think universities are brain washing students? Do you think contraceptives are damaging society? Don’t believe in Evolution or Global Warming? If so then you’ll love Rick Santorum, who’s running for the Republican nomination for President. The former Senator from Pennslyvania hit the headlines after winning the Iowa primary three weeks ago. Continue reading “Just Who Is Rick Santorum?”