Noah Smith on Wealth and Efficiency
By David Henderson
In a recent post on how “normal people” think about economics, Noah Smith writes something that I strongly disagree with:
In a certain sense, the normal people’s approach makes more sense than that of the economists. We are an incredibly rich economy – the world’s richest large economy by far. This means there are relatively few efficiency gains to be had, but the impact of any redistribution of our titanic wealth will be enormous.
Can you guess which part I disagree with? I won’t create suspense. It’s the first clause of the last sentence. That we have an incredibly rich economy in the United States, something that I do agree with, does not at all imply that there are relatively few efficiency gains to be had.
There are inefficiencies all over the place, many of them large. FDA regulation kills people, the drug war kills people and puts hundreds of thousands of black men in prison, and immigration restrictions prevent a huge increase in world GDP and U.S. GDP. I would take time to give links to all my assertions but all you need to do, if you want to see the backing is to do a search on Econlog and find multiple entries on these issues, mainly by Bryan Caplan and me.
UPDATE: Don Boudreaux weighs in and somewhat defends kebko’s comment below.