There’s no logical reason why an economy couldn’t be 100 per cent public sector.
I'm afraid after reading this I must downgrade Tim many, MANY notches.
It is true that (a minimal) government provides a service (e.g. defence, police, justice, and appropriate conditions permitting, some infrastructure and a frugal social minimum). Along with Adam Smith I see a role for government. Tim's following comment is therefore true:
That’s a fallacious line of reasoning: it assumes that the public sector workers of yesterday are going to be the same people as the public sector workers of tomorrow, after several years of chipping away at their real incomes. They might not be. I might decide to become a mobile phone salesman instead of an economics teacher.
We are talking about competitive market based remuneration here. Nothing special about it. Working for the public sector need not be a "sacrifice" or charity. So far so good.
But to go from here to the WILD assertion that Tim then makes (above) about there being no theoretical difference between an economy which is 100 per cent public sector-based and a private economy is BEYOND BELIEF.
And to suggest that the public sector can be as innovative (even inventive) as the private sector is a sign of serious economics illiteracy. I hope that Tim has read Terrence Kealey and Timothy Ferris. Such egregious claims of "creativity" in the public sector are false.
This idea that there is no theoretical difference between a private economy and public sector economy is a characteristic of the foolish "discipline" of welfare economics, in which many unworthy Nobel prizes have been awarded. Just because someone gets a "Nobel" prize doesn't make that persons's views sensible from any perspective. In economics, at least half the "Nobel" prizes have gone to confused socialists and Keynesians.
True, Tim does refer to incentives as a variable, but this issue is not about incentives. It is about FREEDOM. It is about our right to live our live our lives without government meddling.
We TOLERATE a modicum of government in order to achieve a level of social services such as security that will let us innovate and produce goods. Yes, public servants are part of the "market", but they are NOT producers (in the typical sense). Big difference.
For anyone to imagine that socialism and capitalism are theoretically equivalent is a sign of a major gap in their economics education. I don't know what's come over Tim, but surely he's put his foot DEEP into his mouth.
Let him take it out and put it back on the ground. Tim, please read Hayek's Constitution of Liberty if what I've said doesn't make obvious sense. If you can't understand what I'm saying your brain must have been destroyed by the "macroeconmics" courses you took which often equate the 'solution' of the 'central planner' with the market's.
Tim, you're a sensible fellow. Do apologise for this ABSURD error. That will help retrieve your reputation from the brink.
I've been very pleased to read Tim Harford's earlier books: The Undercover Economist (2006) and The Logic of Life (2008). I don't recall much from these two books at the moment, but the impression remains that he is a sensible fellow.
I just finished reading his later book, Dear Undercover Economist (2009) and was once again delighted with the entertaining way in which he presents the economic way of thinking. I'm reproducing two of his short "articles" below. These are both (among tens of others) readily available on his blog/website.
Will more money make me happier?
Will having more money make me happier?
– Karl Johnston, Glasgow
Dear Mr Johnston,
I have been asked the secret of happiness before, but your question is rather specific. To answer it we need to turn to economist Andrew Oswald.
He has worked with numerous collaborators to calculate a “happiness equation”, based on analysing thousands of people’s responses to questions about their contentment. His conclusion is that, assuming nothing else changes, more money makes them happier. He backs it up with a piece of work studying what happens to people who unexpectedly win lotteries – they, too, become happier.
This is what economists expect; not because we believe that people value money for its own sake, but because money can buy all kind of things, and if none of them brought you any pleasure you’d have to be an exceptionally incompetent shopper.
So the simple answer to your question is yes, more money will make you happier. But be careful – simply pursuing money will not, if your relationships, health or job security suffer. Oswald shows that these are vastly more important than money. Getting married produces £70,000-a-year’s worth of joy, although given the cost of weddings these days that’s not much of a bargain. Staying healthy and employed are more important still, worth tens of thousands of pounds a month.
Envy plays a sinister role. Oswald shows that happiness increases with higher income, but it falls with higher expectations. The higher the income of your peer group the more depressed you tend to be. This is not good news for you: since you ask smart questions and read the Financial Times, you must expect a lot out of life. Oswald suggests that you are likely to be disappointed.
And here's another one:
Ideas are nice really
Dear Economist,Governments like to promote innovation. But ever greater innovation means ever greater use of resources, disposability of goods, consumer spending and (one surmises) social envy. Is there a case for suppressing innovation?
Marion Hancock, by e-mail
Dear Marion,There are two ways to raise purchasing power: investment or innovation. Investment means buying big machines so that each worker operates more equipment. It is hard to see how this is more environmentally friendly than innovation. It is also self-limiting: all the investment budget goes on replacing worn-out machines.By contrast, innovative ideas consume no resources at all. They are particularly useful when there are many people on the planet, because everyone can benefit from a piece of software, a better design for the mousetrap or the theory of germs. Not everyone can benefit from my electric hand drill.Nor do innovative products use more resources. Today’s expensive consumer products are tiny, or do not physically exist at all – for example, the 4,000 issues of The New Yorker that my wife gave me for Christmas are stored digitally.It is true that if I was poor enough then I would have received no magazines, digital or otherwise. So perhaps you are not really in favour of suppressing innovation but of ending economic growth entirely. This has proved possible – for example, in Mao’s China or the dying days of the Soviet Union. Environmental Eden did not result.At least an end to innovation might (you surmise) return us to the envy-free days when my great grandmother might have been your great grandfather’s scullery maid.But I don’t wish to find out.