Good for Whom?
By Arnold Kling
I blame Tyler Cowen for pointing me to this post by Matthew Iglesias.
one is constantly reading articles in the press condemning one European electorate or another for refusing to agree to “painful” reforms that are nonetheless “necessary.” This example from The Economist is unusually egregious, but you see it all the time. Missing in these stories are important questions like “painful for whom?” and “why would you want the government to inflict pain on people?” And, of course, the reforms in question are never painful at all for, say, the people who own the publication you’re reading or the people who own or manage the companies that advertise in that publication.
This is type M reasoning of the worst sort. Basically, you cannot argue for any sort of free-market policy without being accused of being a tool of Big Evil Capitalists out to screw Poor Oppressed Workers.
How about some type C reasoning? Who actually ends up screwed by anti-market policies?
Here is an everyday example–the proposal in Massachusetts to slap a $295 tax on businesses for every worker for whom they fail to provide health insurance. At a type M level, everyone was sure that this was an anti-business measure.
At a type C level, it would seem that as a first approximation the $295 tax would be a tax on labor. That is, in equilibrium, firms would reduce their willingness to pay for workers by $295 in response to this tax. Basic, freshman economics says that this tax (which Governor Romney ultimately vetoed) is anti-labor, not anti-business.
The question “good for whom?” is perfectly legitimate. But it has a legitimate, type C answer, based on general equilibrium analysis and empirical research.
The alternative way to answer the question of “good for whom” is to say, “Anything those evil right-wing elites advocate is bad for the less fortunate, while anything we morally-superior left-wing elites advocate is good for the less fortunate.” The only thing that approach has going for it is that it is good for the left-wing elite’s moral vanity.