Posts Tagged ‘transfer programmes’

An Error of Multiplicities

Tuesday, 30 June 2015

Imagine a nation containing two jurisdictions, A and B. Imagine further that the population of jurisdiction A divides neatly into two groups: 51%, who oppose and do not receive transfer benefits from the federal state; and 49%, who receive such benefits (whatever their expressed beliefs). Imagine also that the population of jurisdiction B divides neatly into two groups: 67%, who support but do not do not receive transfer benefits from the federal state; and 33%, who receive such benefits (whatever their expressed beliefs).

The majority in jurisdiction A oppose transfer benefits; yet a higher share of people in that jurisdiction draw benefits than in jurisdiction B, where a majority support such programmes. None-the-less, these figures provide no evidence of hypocrisy in jurisdiction A. Possibly no one there who draws benefits speaks out against them or works to prevent others from receiving them.

In the real world, things are messier. (There'd be six relevant types of people.) But I sometimes see it argued that the people of certain jurisdictions are hypocrites simply on the basis that a majority there oppose some set of entitlement programmes, while at the same time a higher share of the population in that district (than of populations in other districts) draw benefits from that set. The hypothetical case above illustrates the fallacy of that argument.

If we had just one jurisdiction, in which a majority opposed some set of benefits yet a large share of people drew those benefits, the idea that there were some sort of hypocrisy wouldn't naturally arise, unless it were suggested that a majority drew those same benefits. Knowing about other jurisdictions doesn't tell one what one needs to know about that one jurisdiction. But many people get befuddled by the multiplicity, especially when the narrator tells them what they are predisposed to believe.

(There's here also another, perhaps more important fallacy, which I discussed in an entry more than five years ago. People who do not believe that some order should prevail can participate in that order without being hypocrites. It is when they deliberately act to sustain an order against which they express themselves that they are acting as hypocrites.)

Driving towards the Brink

Monday, 15 December 2008

I haven't followed everything that has been said about the proposed bail-out of the major American automobile manufacturers, and I don't know whether the principal point that I'm going to make below has been much noticed.

It is quite natural for people to hold that, if the manufacturers are given a major infusion of financial capital, then they should surrender some control to the creditors; that if the manufacturers are given a bail-out by Congress, then Congress ought to be able to impose some changes in practices and in policies, to ensure that tax-payers are in some way repaid.

But ownership is no more or less than a right of control, and to the extent that control is transferred, ownership is surrendered. What we are then discussing, however we might put it, is nationalization, albeït perhaps only partial nationalization, whether it is called this or not.

Once the automobile industry is nationalized, management of that industry becomes another government programme, with a large bloc of voters fairly directly dependent upon that programme for their incomes. A sizeable portion of this bloc will insist upon indefinite guarantees concering employment and income. The industry would likely become another third rail of the political system, virtually untouchable unless it is to expand the benefits received by the beneficiaries. Further, conceptualizing what amounts to a transfer programme (welfare) as a manufacturing programme will consume additional resources, which really ought to go into other projects. It would literally be more efficient to pay some or all of the automobile workers to stay home than to pay them to make some or all of the vehicles that they would make; but, by golly, the illusion of productivity will trump the reälity of waste.

Because the political significance of a transfer programme is positively correlated with its direct economic benefits to recipients, the stronger are the initial guarantees of employment and of income, the more powerful will be the abiding political effect of the programme. The Republican insistance that a bail-out provide for swift wage cuts probably speaks to some awareness that the bloc of voters in-question would more naturally align with the Democratic Party.

Meanwhile, the White House discussion of doing an end-run to provide a bail-out from other funds may be an attempt to head-off later action by Congress when the Democrats assume the more sizeable majorities from the last elections. Giving money to the manufacturers with fewer strings attached puts less of a programme in place.