I think the explanation for why governments don't apply the appropriate Pigovian subsidies and penalties comes down to political practicality. A negative income tax or a subsidy helping older Americans or ppl affected by covid to keep living in their apartments would require substantial taxation that would be very salient to most voters.…
I think the explanation for why governments don't apply the appropriate Pigovian subsidies and penalties comes down to political practicality. A negative income tax or a subsidy helping older Americans or ppl affected by covid to keep living in their apartments would require substantial taxation that would be very salient to most voters. OTOH pass a minimum wage law or a rent control ordinance and the costs are hidden and non-salient.
Indeed, I think this is a huge part of the reason the left is so opposed to free market mechanisms. Not because they have a theoretical objection to the incentives based approach but because they know it's politically implausible and thus advocating for it isn't an honest signal of concern (people can say they support it with little fear it will ever happen).
I'm a bit confused of the relevance. We borrowed for COVID era and it was temporary and extraordinary so I'm not clear on how it conflicts with my theory.
I think the explanation for why governments don't apply the appropriate Pigovian subsidies and penalties comes down to political practicality. A negative income tax or a subsidy helping older Americans or ppl affected by covid to keep living in their apartments would require substantial taxation that would be very salient to most voters. OTOH pass a minimum wage law or a rent control ordinance and the costs are hidden and non-salient.
Indeed, I think this is a huge part of the reason the left is so opposed to free market mechanisms. Not because they have a theoretical objection to the incentives based approach but because they know it's politically implausible and thus advocating for it isn't an honest signal of concern (people can say they support it with little fear it will ever happen).
Most western countries had furlough schemes though. We did have enormous subsidies in the COVID era (rightly).
I'm a bit confused of the relevance. We borrowed for COVID era and it was temporary and extraordinary so I'm not clear on how it conflicts with my theory.