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Tuesday, November 22, 2005

More on Taxes and Regulations

I wrote here about how taxes on the more well off negatively impact the economic opportunities of the less well off. Howard wrote here (with an assist by Thomas Sowell) about how regulations such as minimum wages negatively impact the economic opportunities of the less well off. In the New Yorker, James Surowiecki (of "The Wisdom of Crowds" fame) writes about both taxes and regulation:
The Nobel Prize-winning economist Edward C. Prescott has pointed to sharp increases in Europe’s tax rates since 1970—higher taxes give workers less of an incentive to work extra hours. But taxes aren’t high enough to explain Europeans’ new taste for free time. A more plausible explanation was put forward recently by the economists Alberto Alesina, Edward Glaeser, and Bruce Sacerdote: European labor unions are far more powerful and European labor markets are far more tightly regulated than their American counterparts.
Interestingly, in the paper by Glaeser, Alesina, and Sacerdote, the authors point out that the Europeans are very happy (based on life satisfaction indices taken from Eurobarometers data) to work less even though they have less income. Indeed, the authors seem to believe that labor regulation may actually be a good thing, but won't quite come out and say it explicitly:
A very hard question to answer is whether labor unions and labor regulation introduce distortions that reduce welfare or whether they are a way of coordinating on a more desirable equilibrium with fewer hours worked. Since answering this question is difficult and the question is heavily politically charged, we won't be surprised if the debate will continue for a long time with heated tones.
They wrote the paper last March. I wonder if they would get the same results now after the riots in France and Denmark?

3 comments:

Oroborous said...

Free labor markets give everyone the choice of how much they'd like to work.

If anyone's happy with less income for less work, (and millions are), then they simply WORK LESS, or at easier jobs.

If people want to increase their income by working more, or harder, then they're free to do so.

It's moronic to conclude that since Europeans are happy with less money for less work, it would raise the happiness of Americans to restrict their ability to work.

For starters, as Bret alludes to, part of the reason that the Euros are happy is because they have extensive public services available to them - but their nations are GOING BROKE providing the services.

In essence, the Euros are being made happy through embezzlement of their children's birthright.

Hey Skipper said...

The answer is clear: unions are a parasitic drag on the economy, and are nearly perfectly described by the phrase "self licking ice cream cone."

IMHO, Pres Reagan's most lasting legacy will be his taking on PATCO.

Bret said...

Oroborous wrote: "It's moronic to conclude that since Europeans are happy with less money for less work, it would raise the happiness of Americans to restrict their ability to work."

Yes, and secondly, the implication that it's the government's job to implement policies that restrict individual choice is horrifying.