Tuesday, October 21, 2008

...and I guess I'm a socialist, too

I know, I know. I need to spend less time writing about stuff Sarah Palin says. But I swear, I can quit any time I want.

Sarah Palin recently criticized Obama's tax plan, saying, "this is no time to experiment with socialism". But is a little more income redistribution really "socialism"? Economists for Obama weigh in:
  1. The definition of socialism to which most economists, poli sci types, etc, adhere is that socialism is that form of economic organization in which the state controls the means of production.
  2. While there are some examples of this sort of thing in just about any market-based economy (geez, the government controls the military!), the idea that redistribution per se implies socialism is ridiculous. Hell, the second welfare theorem states that in a perfectly competitive economy (I bet that got the attention of all those neoclassical macro fans!), you can get to any desired (Pareto) efficient allocation with laissez-faire marginal tax policy and the right set of lump-sum...wait for it...redistributions! I guess in current parlance you might call that socialism the Arrow-DeBreu complete-markets way.
Trade theory works the same way. The idea is that there are winners and losers, but the winners win more than the losers lose, so they can compensate them.

For those of you who don't know, the Arrow-DeBreu model is the foundation of neo-classical microeconomics. While people typically think of economists as advocates of completely unfettered markets, a stroll through standard economic theory paints a more complicated picture.

And while we're on the topic of redistribution, would Sarah Palin like to explain why Alaska receives more federal revenue than any other state?

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