A few days ago, a friend sent me a 297-word graduation speech by economics Nobel laureate Thomas Sargent, delivered in 2007, that's been making the rounds. The speech consists of twelve precepts, delivered with economists' economy, that have been hailed as a distillation of "everything you need to know about economics," as Ezra Klein -- too fond of such sweeping overstatement since launching Vox -- put it.
The piece rubbed me the wrong way, not because its precepts are not true, but because their uber-message seems out of step with our slow-growth, post-meltdown, austerity-hog-tied economy. The upshot, as Josh Barro summarizes it this morning, is that there's no free lunch. The two bullet points that bugged me in particular were these:
The piece rubbed me the wrong way, not because its precepts are not true, but because their uber-message seems out of step with our slow-growth, post-meltdown, austerity-hog-tied economy. The upshot, as Josh Barro summarizes it this morning, is that there's no free lunch. The two bullet points that bugged me in particular were these:
4. Everyone responds to incentives, including people you want to help. ThatTo take the second first: sure. But as we've learned in the last few years, there's also tradeoffs between inequality and efficiency. When the top 1% grab 95% of the fruits of growth, they tend to 1) use their outsized capital unproductively, increasing their rents, 2) hollow out their customer base, and 3) extend their control over the political system, eroding checks on their own power and ensuring their further corruption.
is why social safety nets don't always end up working as intended.
5. There are tradeoffs between equality and efficiency.
