Thursday, February 14, 2008

Laughing about Kicks to the Groin

Now this is categorized as 'comedy' at YouTube and it is pretty funny for everyone who is not being kicked in the groin. However this momentary gain of pleasure for most people is being bought at the very high expense of a single person, the target of the kick. He is going to be in pain for the rest of the day, including a good half hour to an hour of intense pain.

Total social utility may have been increased by more people cracking a smile and chuckling than they otherwise would have, but there is a significant and concentrated cost that was required to improve social utility. I could very easily understand the motivations of the man who was kicked in the groin to opt out of future kicks and for him to be very unpersuaded by a maximal social utility argument as why he should continue to be kicked in the groin.

Dave at the Glittering Eye in a response to a recent Robert Reich editorial made a couple of interesting points concerning tradep, labor market mobility and growth patterns that prompted the kick in the groin image:

And I know that real wages are stagnating for many of us. I’ve seen it in my own family with lots of smart, well-educated, hard-working people struggling to stay in the middle class....

If Dr. Reich’s prescription is taxing away that income so it can be spent here rather than being invested elsewhere, is that really the best solution? That sounds like a “beggar thy neighbor” strategy to me, no?

And this

We also need stronger unions, especially in the local service sector that’s sheltered from global competition. Employees should be able to form a union without the current protracted certification process that gives employers too much opportunity to intimidate or coerce them. Workers should be able to decide whether to form a union with a simple majority vote.

sounds like a case for protectionism. If the only way that the American economy can prosper is protectionism, that doesn’t require stronger unions. That simply requires domestic hiring laws (particularly for companies that deal with the government) and erecting barriers to termination similar to those in Europe. Then we should expect some of the growth problems common in Europe, too.

There have been aggregate gains in the economy, and if we take GDP as a decent measure of aggregate utility, total and per capita real GDP has increased over the past thirty years. However as Dave recognizes in the first paragraph I quoted, the gains have not been evenly distributed and for most people staying in place is a more urgent priority than getting ahead in real terms.

If you believe (as I do) that trade should increase overall GDP, it will also produce proportional and absolute losers. Those losers have not been compensated for their losses and current policy regimes are lying most of the population up for another couple kicks to the groin. It is entirely rational to make significant attempts to avoid being kicked in the groin even if that action decreases social utility. Protectionism is a high cost game with significant long term costs, however if those costs are borne by the winners of the current multi-generational policy regime, why should the losers be too concerned. Yes, long run growth will be lower, but it is not like previous long run growth has been all that beneficial.

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