A case for government intervention: unemployment

[Libertarian]

Victor said: So what do we do? We want to mitigate the negative utility for both individual and society which are inherent in the risk of unemploymenmt...



If you want MORE of something, you subsidize it. Take a look at the unemployment and workers compensation rates in the U.S. (where, as numerous people have pointed out above, unemployment "insurance" exists). NOW take a look at the rates in European countries where there is a much more robust system for paying people when they're not working. Get the picture?

If you want more of something, subsidize it. And for god's sake, don't call this idea "simplistic." It is simple, yes, but sometimes the answer IS simple.

Sincerely,
Libertarian (spell it with a big "L" or a little one, I'm both!

 

[Victor Danilchenko]

Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: A case for government intervention: unemp

shanek

I'm not! We're not talking about a natural monopoly here! We're talking about a government monopoly!!!

if by 'government monopoly' you mean legally created monopoly, then you have repeatedly failed to support your assertion that such exists.

Furthermore, can you make up your mind? Does private unemployment insurance fail to exist because government legally prevents it, or because there is no demand?

It's clear you didn't take any longer than that. But with all of the claims, all of the source material, that amount of time is clearly inadequate for anyone who calls himself a skeptic.

What fscking source material? You spent the entire post ranting about how government creates more unemployment, and one (1) paragraph actually explaining why unemployment without government interference wouldn't be a problem. You didn't reference your claim about impact of frictional unemployment at all, nor your claim about the composition of unempoloyment pool absent government intereference. Your sources were irrelevant references arguing that government regulation creates more unemployment. those aren't relevant!

Once again, you cite absolutely irrelevant material, and then parade your citations around as proof that you "researched the subject". Sheer lunacy. Why don't you actually research answers that address my argument? But had you done so, you would have had to reveal that even the originator of your beloved NRU hypothesis would disagree with you.

And is there a reason why you failed to address my correcting your mangling of NRU hypothesis? is there a reason why you failed to address the fact of structural unemployment, for example, or to admit that yes, you made a booboo there?

I've been out of work for longer than that. So have other people I know. None of us got put in the poor house.

And could that be because you got unemployment support -- or because you purposefully left your previous job for some reason, having first made provisions for reducing the deleterious impact of such a move?!.

Right, and that's why the market quickly works to correct it. It only happens because it's impossible to know exactly where the level of total production is.

Why have you snipped my point to overproduction? Why do you ignore the fact that market couldn't, mathematically, be deviating from optimum in one direction only -- underproduction? You make it seem as if market oscillates between underproduction and efficient production -- just comes up against a stop, and BANG! stops there. There have been numerous cases, including recetnly in US economy, when labor market got exhausted and wages went up beyond their normal value, eventually depressing the labor market in an unemployment backlash. Remember the roaring late 1990s, when anyone could get a high-paying job? Remember how the wages were driven inefficiently high, unemployment was inefficiently low, and everyone knew it?

It's nowhere near the downward spiral you're trying to make it out to be.

I didn't make it out to be a spiral, dude; I never mentioned anything of the sort. I made it out to be a pendulum, with "give" on both sides of the optimum -- sometimes labor supply gets too low and wages get inefficiently high, and sometimes it's the other way around. However, admitting that would force you to concede that the picture you are painting -- of the "natural unemployment" rate being about the lowest unemployment can go -- is ridiculous.

Not when the prices are low enough to not make it worthwhile.

Ah yes, under libertopia, everyone would be so rich that they wouldn't need to worry about piddling concerns like risk...

Do you really think there'd be aby demand for medical insurance if every doctor or hospital visit cost 5¢?

yeah, and if cars cost $1 each, we wouldn't care about liability insurance.

Do you really think the medical services would cost that low unde libertopia? get fscking real. I will be the first to admit (in fact, I had said so in the very first post) that medical insurance costs are inefficiently high, which has overall inflating effect on cost of medical services; but even I I, generously, allow for two-fold or three-fold reduction is medical costs under libertopia, that would still drive people to seek medical insurnace -- it's just that medical insurance would be cheaper as well.

There's a point at which it just isn't worth getting insurance.

But healthcare doesn't come anywhere near t5hat point, and neither does unemployment.

Above that point, there's demand for insurance, and so the market would provide it. Below that point, and no one wants it anyway.

Yes, there is no insurance for losing your lollypop, but only because administrative overhead of such would be ridiculously high compared to payoffs, thus driving premiums insanely out of proportion with the expected risk value. This is not th ecase th emoment you move out of the completely trivial price range. there is insurance for pretty much anything else that's insurable. There would have been insurance for unemployment too, had it been an insurable risk; but it's not. Why don't you just skip the BS, and address my technical asrgument for why unemployment insurance couldn't exist?

BS. Many people, many companies, including large corporations in many cases decide to self-insure.[/quoter]Companies, yes, because they can average out their own numerous costs; this is not the case for insurable risks on individual levels.

The money is set aside, it actually bears interest, and the interest goes back into the budget. If you can afford the initial outlay to put the money into the separate account to begin with, then this is a much more desirable option than paying an insurance company as you go.

that depends on the magnitude and expected frequency of th einsured event's occurrence. If you live on the egde of a flood zone and your house gets flooded once a year, you can "self-insure" for damages; it would be irational to do otherwise for a risk with probability of 1, because then the insurance company would charge more per year (due to administrative overhead) that you would per yourself to repair your house every spring.

Contrawise, it would be ridiculous for you to self-insure against a hurricane if you lived in mid-west -- only a small numer of houses get destroyed each year, but the magnitude of damage is monumental. You would have to put aside the entire cost of the re-building house, and chances are that the fund wouldn't get used anyway! In this case, as in vast majority of cases, it's far more efficient to spread the risk via third-party insurance. Same goes for medical services -- nobody wants to keep $1M in stock in case they need a life-saving heart surgery, yet this is what medical selkf-insurance would require.

Why the fsck am I educating you on the basics of insurance? You always act like an economics buff, yet you repeatedly demonstrate that you don't understand economic theory, and instead are a "stamp collector" of economics, collecting libertarian evangelical trivia without understanding the economic theory behind it.

And the cause is just irrelevant, huh?

yes, it's relevant -- it shows that even though there is demand for risk aversion, this particular risk is not an insurable risk.

It tells me you don't like answering direct questions.

i did answer the question. it took that long for society to mature enough to recognize the value of social safety net. Governments move slowly, and it's no surprise. What's curious is that the market never stepped up to the task of providing unemployment insurance, a fact which you ignore by concluding (begging the question, really) that there was no demand.

Provide historical data from around the turn of the 20th century showing this demand. Or was there demand simply because you believe there should have been?

No, demand is always there, because humans are always risk-averse. For any insurable risk outside the completely trivial (like the loss of your lollypop), there would be insurance market. The rate and magnituide of the risk would determine the size of the market and the relationship between premiums and payoffs, but it wouldn't have effect on the market's sheer existence. We have insurance for, like, everything -- but not for unemployment, even though unemployment is a common and extremely deleterious risk, mandating strong demand for insurance.

The bottom line is, YOU HAVE NOT SHOWN THAT THERE ACTUALLY WAS SUCH A DEMAND. And as YOU are the one making the claim, it is up to YOU to support it.

Yes, I have shown it. What you haven't done, is argue that private unemployment insurance is possible. Instead, you simply assume that every demand meets a suppy, and conclude that the lack of supply of private unemployment insurance indicates lack of demand. This arguing from assumed conclusion to premises is SOOO xian apologetic, it's not even funny.

You haven't shown that there was!

yes, I have; I have soundly argued that there is demand for unemployment protection due to humans' risk-averse nature. Even if the demand was small, there would have been a small market for priuvate unemployment insurance; but there isn't any. There is health insurance for pets, but there is no unemployment insurance -- for you to claim that the latter fact is due to lack of demand, is simply intellectually dishonest demagoguery.

Several reasons. Most importantly being the fact that government did not grant themselves a monopoly in education or retirement.

You keep claiming that government granted itself legal monopoly on unemployment protection, but you aren't supporting this claim. How come?

 

[Victor Danilchenko]

Libertarian

If you want MORE of something, you subsidize it. Take a look at the unemployment and workers compensation rates in the U.S. (where, as numerous people have pointed out above, unemployment "insurance" exists). NOW take a look at the rates in European countries where there is a much more robust system for paying people when they're not working. Get the picture?

Avoiding created "unempoloyment trap" (where earning extra $1 loses you more than $1 in unemployment benefits) is a purely technical matyter; unemployment trap is not inherent in the very idea of unemployment support, and thus unemployment support doesn't have to encourgae unemployment. The unemployment support has to be structured so that the unemployment income U (which includes unemployment services, such as medical benedfits) + value of leisure L have to be less that the employed income E + value of reduced leisure L' (and remember, leisure has diminishing marginal utility as well). As long as U+L < E+L', unemployment wouldn't get "subsidized".

If you want more of something, subsidize it. And for god's sake, don't call this idea "simplistic." It is simple, yes, but sometimes the answer IS simple.

No, this is simplistic. Simply paying unemployment benefits doesn't necessarily encourage people to not seek jobs (imagine if the unemployment benefit was $1); higher unemployment benefit might encourage them to take a little longer to seek a better job, but this is very possibly actually good for economy, as it will lead to each individual being more efficient a propducer of value due to having found a job better fitting to theri skills. You don't generally want unemployed RNs to become McD's burger-flippers, after all -- and you don't want RNs to become burger-flippers just because they are desperate to buy groceries (we might want themn to become burger-flippers if there is oversupply of RNs for whatever reason, but not merely because they are desperate).

Contrawise, negative externalities of unemployment (default on financial committments, crime, destitution, etc.) most definitely have a negative impact on eocnomy.

So the question is not if we should have unemployment protection, but how and how much of it we should have.

 

[shanek]

Victor: I will not acknowledge you any further in this thread until you actually read my posts, consider my sources, and respond to them accordingly. I am sick and tired of bending over backwards, making arguments, sourcing them, taking hours of personal time to do so, only to have you p*ss all over them without a second thought.

 

[Valmorian]

Here's one more "irrelevant, off-topic" (doubtless according to Victor) point about unemployment insurance: it, in and of itself, may be detrimental to the economy as a whole and employers and workers in particular.

While I think some of your points are interesting Shanek, Victor is right, you ARE going off on tangents here.

I do wish you'd supply the reference that suggests that U.I. is a government monopoly due to law. Why aren't there private unemployment insurance companies? Are there laws to prevent their formation or not?

Dwight R. Lee and Richard B. McKenzie, in Failure and Progress: The Bright Side of the Dismal Science (Cato Institute, 1993), wrote: "Those who experience unemployment feel pain—but because of that pain they are likely to obtain new employment in which they provide more value to consumers... [Unemployment is] to the economy what physical pain is to the body,... letting people know when the resources they are using in one activity would be more productively used in another activity."

Um, that's an interesting way to put it. Of course people who lose their jobs because of a company collapsing (for example) could be using their skills more productively in another job. I'm still not sure what this has to do with U.I., though, since it does take time to get that new job, and not everyone is fortunate enough to have enough money to survive between jobs.

The problem with unemployment insurance, even privately run, is that it would take out the fear and reduce the drive to get a new and better job.

Isn't this a little like saying that car insurance takes the fear out of car accidents and therefore reduces the amount of caution one takes when driving?

In any case, this is obfuscation. There is obviously a demand for unemployment insurance, why isn't there a private sector supplier for such?

My mother worked in the NC Employment Security Commission for decades, and she said it was amazing how many people found jobs within the last few weeks of their eligibility. Without the benefits, there isn't as much of a desire to go out and be productive.

An anecdote? Well, hell, I know people who have been trying to get a job for ages and have been unable to do so. So what?

Provided that U.I. supplied enough money to cover basic living expenses, you're supposing that this removes the impetus to get a better job? Isn't this kind of anti-free market of you? What about the desire to improve one's standard of living? Isn't that supposed to be part of the driving force behind the market?

 

[Victor Danilchenko]

shanek

Victor: I will not acknowledge you any further in this thread until you actually read my posts, consider my sources, and respond to them accordingly.

i did, I did, and I did; the appropriate response was a lack of response, because your sources argue that government regulations increase unemployment -- a point wholly irrelevant to what I am arguing about. i would have examined and responded to your sources supporting the contention that Friedman's "natural unemployment" has no deleterious effect on unemployed individuals, nor incurs negative externalities, except that you didn't support that claim at all; nor have you supported your claim that government granted itself legal monopoly on unemployment insurance. You didn't to anything to support those claims of your which bear even tangential relationship to the topic -- you only supported the claims hwich are wholly irrelevant, but which I presume you feel you can advance with confidence.

For that matter, you basically completely ignored my entire original post. To this moment, you haven't done anything to address my argument about private unemployment insurance being impossible for technical reasons. So if anyone should get huffy because the core argument is getting ignored, it's me.

I am sick and tired of bending over backwards, making arguments, sourcing them, taking hours of personal time to do so, only to have you p*ss all over them without a second thought.

Argue smarter, not harder. Spending three hours answering argument X won't do you any good when I didn't actually advance argument X. is it any wonder that your response to X gets ignored, then? i will not let you derail the topic to discussing your pet subject -- how terrible government is screwing the economy; start a new thread if you want to rant abotu that, and post your PDF references there. In this thread I want to talk about [un]viability of private unemployment insurance.

 

[Victor Danilchenko]

Valmorian

I do wish you'd supply the reference that suggests that U.I. is a government monopoly due to law. Why aren't there private unemployment insurance companies? Are there laws to prevent their formation or not?

yeah, I am still waiting on those references too.

Isn't this a little like saying that car insurance takes the fear out of car accidents and therefore reduces the amount of caution one takes when driving?

Yup. that's exactly it. What Shane effectively advocated is social engineering -- let the bastards suffer so that they would look for a job harder. He is ignoring the fact that purely economically, unemployment insurance would have appeared had it been possible.

In any case, this is obfuscation. There is obviously a demand for unemployment insurance, why isn't there a private sector supplier for such?

not only that; I gave a detailed economic argument for why there cannot be such, and Shane hasn't said anything that would actually address that argument. He is simply trying to pretend as if that original argument -- which is raison d'etre of this thread -- doesn't exist. I spent time (on the order of days and weeks, not hours!) reading up on economic theory, researching the topic, and he simply ignores that argument's existence.

Provided that U.I. supplied enough money to cover basic living expenses, you're supposing that this removes the impetus to get a better job? Isn't this kind of anti-free market of you? What about the desire to improve one's standard of living? Isn't that supposed to be part of the driving force behind the market?

Well, markets are oimnipotent when that suits Shane, and limited and unable to compete with government's provision of services when that suits shane. Note how when confronted with the fact that private alternatives to mandatorily financed government services (such as SS or education) exist, he switched his position to claiming that there's no demand for unemployment insurance.

Shane has been arguing very dishonestly in this thread -- I suspect because I have prepared a case which he cannot address with the outcome which he would prefer. He claimed that his mind can be changed by evidence, but that claim is exposed as a lie here; it's not an honest statement of methodlogical commitment to reality, but rather a shameless ploy to gain credibility by claiming open-mindedness.

 

[Victor Danilchenko]

Oh, and let's not forget that the libertarian idol, Milton Friedman, advocated a welfare state -- a very austere one limited to relief of destitution, but a welfare state nonetheless. Milton's negative income tax is exactly a form of welfare, a mechanism for wealth transfer from the rich to the poor.

As an economist, Friedman realized that it's cheaper for society to relieve destitution than to pay its negative externalities...

 

[Libertarian]

So the question is not if we should have unemployment protection, but how and how much of it we should have.

Alas, Shanek, isn't this the problem with a lot of the programs we're saddled with today? The question of "IF" is never asked, only "HOW" or "WHEN".

 

[Victor Danilchenko]

Libertarian

Alas, Shanek, isn't this the problem with a lot of the programs we're saddled with today? The question of "IF" is never asked, only "HOW" or "WHEN".

Whether that is true or not, does nothing to revive your argument that we shouldn't have unemployment support because it subsidizes unemployment.

Yes, with many programs, we should ask "if" rather than "how" and "when"; but we already aksed "if" about unemployment support, and the answer is "yes".

 

[shanek]

I do wish you'd supply the reference that suggests that U.I. is a government monopoly due to law.

There isn't a single one covering it all; it's different in every state. In NC, it's Chapter 96 of the NC General Statutes, which expressly directs the Employment Seurity Commission authority over unemployment payments "under the police powers of the State, for the
compulsory setting aside of unemployment reserves to be used for
the benefit of persons unemployed through no fault of their own."

Any private unemployment insurance company would be seen to be acting in contrary to the authority of the state, with the above mentioned police powers being used to that effect. Also, you don't have the choice of not paying into the system even if you'd never remove a dime frome it.

I'm still not sure what this has to do with U.I., though, since it does take time to get that new job,

Because as I pointed out, most people simply wait until their benefits are about to expire. That makes it clear that they most likely could have gotten a jub much earlier if they had the incentive to do so.

Isn't this a little like saying that car insurance takes the fear out of car accidents and therefore reduces the amount of caution one takes when driving?

No, because with accidents you have problems other than monetary—being hurt or killed, having to do without a car for a period of time, etc. With unemployment insurance, what real incentive is there to get a job right away when people are paying you to essentially jump thorough a couple of easy hoops?

Provided that U.I. supplied enough money to cover basic living expenses, you're supposing that this removes the impetus to get a better job? Isn't this kind of anti-free market of you?

Since what we're talking about is no part of the free market at all, this accusation baffles me.

 

[shanek]

yeah, I am still waiting on those references too.

Too bad. You must be eighteen different kinds of stupid if you think I'm going to bend over backwards for you anymore after the way you've treated me. I gave the references to Valmorian because he/she/they/whatever has never treated me in such a fashion.

He is ignoring the fact that purely economically, unemployment insurance would have appeared had it been possible.

You have not done one single thing to show that that was the case. Where's the figures on demand for unemployment insurance before 1930? Where are they, Victor? That's vital to your claim! Where's the evidence, Victor?

 

[shanek]

Alas, Shanek, isn't this the problem with a lot of the programs we're saddled with today? The question of "IF" is never asked, only "HOW" or "WHEN".

And the dog's name was, BIN-GO!!!!

 

[Victor Danilchenko]

shanek

Too bad. You must be eighteen different kinds of stupid if you think I'm going to bend over backwards for you anymore after the way you've treated me.

After the way I treated you? I spent days -- not hours, days -- preparing the titular argument of this thread, and you ignored it completely. I simply kept asking you to address it -- but those requests went similarly ignored. Now I will follow your suit, and leave in a huff; but let the world know that I first gave you ridiculously plentiful chances to actually show a sign of understanding and integrity, and address the argument on which I spent so much time and effort -- chances which you completely and dishonestly ignored.

I gave the references to Valmorian because he/she/they/whatever has never treated me in such a fashion.

the reference you gave is, as usual, utter BS. The quote gives the state the power to forcibly collect unemployment benefit -- it does not forbid private unemployment insurance. No matter how much you would wish to read it that way, that's not what it says; and I betcha if you check other state laws, you similarly won't find anywhere the laws that actually make private unemployment insurance illegal. Don't bother considering that, though -- reality never stopped you before, why should today be any different?!.

You have not done one single thing to show that that was the case.

Of course I have, you liar! I argued how any significant insurable risk gets insured -- but some risks are uninsurable, and unemployment is one of them.

Where's the figures on demand for unemployment insurance before 1930?

How do you measure in a free-market economy demand for something that the market cannot provide? Show me figures proving demand for unbreakable cars that get 2000 mpg and cost $10! You can't, can you? and yet I am sure you will agree that the demand is there.

I did provide both the argument for why it would be demanded (because unemployment is a risk, and humans are risk-averse) and why it would be impossible; and you addressed neither argument. Your whining and lying and weaseling makes it painfully obvious that you have no answer, and so you engage in obfuscation. How fscking typical. I expected this sort of dishonest, deceptive behavior from you, but I wished to give you the benefit of the doubt; and my better nature was proven wrong. The cynical Victor wins once again.

Where are they, Victor? That's vital to your claim! Where's the evidence, Victor?

All around you. There's insurance for pretty much anything that's insurable. If the demand is small, there may be few insurance companies offering that insurance -- but there are no insurance companies offering private unemployment insurance. It takes a dishonest libertarian liar like yourself to claim with a straight face that there is no demand for unemployment protection, and that there wasn't any before New Deal -- but dishonesty never stopped you before when you are on a crusade to defend your religious faith from truth and reality. You never even got the balls to admit that you were wrong about unemployment composition under free market -- that you ignored structural unemployment completely, and that you basically ignored cyclical unemployment; nor have you ever admitted that your 1-2% unemployment figure was utter BS (turns out that according to Friedman, average rate of unemployment between 1900 and 1930 was 4.7%, not 1-2% as you so dishonestly claimed it would be).

When do your lies in the name of your religion stop, shane? When will you shed any pretense to basing your beliefs on reality, and admit that it's simply an article of religious faith for you? When will you admit that your claim to open-mindedness was a deception, that there is no fact that would change your mind?

I am sick of your lies, your lack of intellectual integrity, your begging the questionsd and your religious apologetics. I decided to give you a chance and take you off the ignore list, but you could neither maintain an honest intellectual discourse nor keep a civil tongue, nor for that matter even understand that the method you conducted the conversation by were uncivil and would only lead to more strife. You are a faith-blinded self-deceiving liar, shane.

Good bye, shane. May your lies for your faith keep you warm at night. You are going onto my ignore list for good.

 

[Libertarian]

Actually, I DO believe that if you took away auto insurance, accident rates would decline.

And, actualy, I DO believe that if you doubled unemployment benefits, unemployment would rise.

Does anyone seriously argue otherwise?

 

[Mahatma Kane Jeeves]

FYI:

Reader's Companion to American History

Once arrived, the problem proved to be tenacious and difficult to solve. Beginning in the 1870s, unemployment became a persistent feature of economic life in the Northeast and the Midwest, and it became a national phenomenon no later than the depression of the 1890s. From the Civil War until World War II, unemployment rates ranged from roughly 4 or 5 percent in good years to more than 15 percent during the troughs of the worst depressions. But such figures (which reveal only the percentage of labor force members simultaneously jobless) understate the breadth of the phenomenon. In all likelihood, between 20 and 25 percent of working Americans experienced some unemployment during the average year, and they tended to remain jobless for roughly three months. During depressions, up to 40 percent of the labor force was laid off in the course of each year for spells averaging more than four months. The problem was most severe during the downturns that began in 1893, 1907, and 1920, and it reached its nadir during the Great Depression of the 1930s—when roughly 25 percent of the labor force was simultaneously jobless, with many of the unemployed remaining out of work for a year or more.

 

[Victor Danilchenko]

Libertarian

Actually, I DO believe that if you took away auto insurance, accident rates would decline.

And, actualy, I DO believe that if you doubled unemployment benefits, unemployment would rise.

Does anyone seriously argue otherwise?

Yes. I don't think that people drive carelessly because they are covered by auto insurance -- there are after all significant financial penalties associated with causing an accident, in addition to the risk of injury and death.

I do think that unemployment rates would rise if you doubled unemployment benefits, but that's a simpolistic thinking. The unemployment rate increase would be because the equation I presented earlier (U+L < E+L') would be violated for more people. This doesn't mean that a well-designed unemployment protection program would harmfully affect unemployment rates.

 

[Victor Danilchenko]

Mahatma Kane Jeeves

Ah, a fascinating read; thanks. I wager it won't change Shane's mind, though.

 

[Mahatma Kane Jeeves]

The article on poverty is very interesting also.

 

[Victor Danilchenko]

Mahatma Kane Jeeves

The article on poverty is very interesting also.

I actually bookmarked the entire Reader's Companion, and was planing to peruse the interesting-seeming articles later; thanks for the pointer.