Posted by Joseph Y. Calhoun, III

Yesterday, I engaged in a bit of debate with Invictus at The Big Picture over a post there called, An Epidemic of Laziness? During that debate, due to being in a somewhat foul mood about other things, I may have been a tad less civil than I would normally be and so if I offended anyone over there at TBP, I apologize. And so, let me see if I can clarify a bit with a short note to Invictus:

I do believe the results of the Austrian study I linked to are valid because while there are cultural differences, Austrians are human too and respond to incentives just as Americans do. One of the interesting things about economics is that incentives tend to work pretty much the same across cultures although to me it is the micro differences between cultures that are often most interesting. However, since this seems to be a sticking point for you I am willing to concede the point and move on. There are plenty of studies which support my viewpoint; I only linked to a few. Like I said before, this isn’t particularly controversial in economics.

I am somewhat confused about what you find offensive about Kyl’s remark that “unemployment relief doesn’t create new jobs” and that “paying unemployment compensation is a disincentive…to seek new work.” This statement, if you accept the vast majority of the economic literature, is not controversial and is literally true. I added the modifier “at the margin” to clarify the statement but even without the modifier the statement stands. Kyl did not say that it is a disincentive to everyone and while I don’t want to speak for him, I doubt that’s what he meant. So are you offended that some humans respond to the incentive of extended benefits by remaining unemployed voluntarily? Or are you offended that Kyl pointed it out?

As for Tom Delay, well, I have to admit that I find nearly everything about the man offensive. If he were found dead tomorrow, hogtied inside a house tented for termites with a bruise on the back of his head, I’d say, “nothing to see here, move along”. And I have serious doubts as to whether the exterminator understands the concept of economic incentives or the effects of policy at the margin. So, if you feel the need to ream Tom Delay at any point in the future, you won’t hear a peep out of me.

What I’ve been trying to get at is exactly this idea that incentives in the current environment don’t matter. It seems this is becoming an accepted way to view things and I think it is being used as an excuse to enact policies that we normally wouldn’t accept. I am not an economist as I’m a more practical kind of fellow but I’m not dumb and I’ve been studying the topic for nearly 30 years now. For me, economics is not about the equations and models that have become so prevalent over the last several decades (although with an engineering background I have no problem understanding the math); economics is the study of human behavior. In short it is about how humans respond to the incentives placed before them. Incentives matter regardless of the economic environment and one of the more interesting things about it is that as humans we often respond to incentives in unconcious ways. The brain works in mysterious ways. Even if the incentives are weak or the effects they cause are weak, they matter because they effect behavior for some individuals. In some cases the actions of individuals at the margin make a large difference in the outcome of a policy that seems relatively benign on the surface. Think butterfly wings and weather. Incentives always matter.

Someone earlier in the thread asked why Republicans always try to make their point with anecdotes. That is particularly rich considering the recent health care summit where every Democrat on the panel started with a sob story about the pain and suffering of someone due to the lack of health insurance but even if it is true, there is nothing wrong with making an economic point with anecdotes. In fact, I think it is often more enlightening than a page of equations describing the behavior of mythical individuals within an economic model that resembles the real world only superficially. The anecdotes mentioned on this thread, if true, all add evidence to the debate. All of us probably knows someone - and those of us who self identify as Southerners probably know several someones - for whom the difference between an unemployment check and a paycheck is measured in six packs or boxes of shotgun shells or most frighteningly, both. The people I know who fall in that category often make up the difference between the unemployment check and the paycheck by working off the books so their cash income is basically unchanged. The question before us is whether we just ignore those people -and keep paying them benefits- or acknowledge them and deal with them. As I said earlier in the thread, when do we cut off these extended benefits? At what level of unemployment will it be acceptable? Burying our head in the sand and saying that we are offended by the notion that some Americans are lazy bastards who will milk the system does not further the debate.

As for the political nature of your post, you are right of course. You are free to make political points if that is what you desire. But if your political point is that Republicans are meanies and Democrats are not, that isn’t particularly original or insightful. I don’t particularly care for politicians of any stripe and tend to lump them together in a group I label, “Impeding Social Progress” or “Liars” or ”Waste of Oxygen”. I tend toward the public choice theory and believe that politicians of all stripes are just doing what all the rest of us do -responding to the incentives placed before them and acting in their own best interests. You are free to believe that Democrats really care more about their fellow citizens than Republicans but I find it hard to swallow.

As for Zandi, well I tend to think more along classic economic lines and so don’t find his brand of Keynesianism very convincing. Or anyone else’s for that matter. It doesn’t matter to me what party or candidate he works for. I surely didn’t mean to imply that I support The Heritage Foundation either though. My political leanings are libertarian so most of my think tank reading is done at places like FEE and Cato.

Like everyone else out here I’m just trying to figure out what is the right thing to do to fix the mess that is the US economy. I think the folks there at The Big Picture are too and I’ll keep reading and commenting when I think it’s important to add my two cents. As BR said in the thread, good debate and very interesting to read all the comments.

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