All entries for February 2008

February 11, 2008

John Gray on nationalised industries.

Reading the Adam Smith Institute’s blog came accross this quote from the philosopher John Gray:

We should junk the idea that state services should always be run as businesses; this has left public services struggling with debt and fixated on targets. It would be better to hive off some functions from the state altogether while accepting that others should be managed on non-market lines. We should be ready to give back autonomy to institutions. Devolving power has become the catchword of the hour for the opposition parties, but it involves more than giving schools and hospitals more discretion to decide their budgets. It means leaving them free to manage themselves whether or not the result is efficient.

Its that second sentance, in bold, that caught my attention. In the last couple of decades we have seem many nationalised industries turn into quasi public firms with market elements (e.g. rail industry). The result has been for firms to lack the accountability of either the marketplace or parliment.


February 10, 2008

Poverty Trap.

On our friday radio one of the issues we discussed was the poverty trap. In particular was cited one example of a man with a physical disability. He was given benefits in compensation of it. But after he did some event (I think it was a walk) to raise money for a charity the government decided he wasnt disabled anymore and so took away his benefits. This is the case of the poverty trap. Another lucid example if given today in Greg Mankiw’s blog:

the poverty trap is still very much a reality in the U.S. A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me. She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn’t make ends meet any more. I told her I didn’t know what I could do for her, but agreed to meet with her. She showed me all her pay stubs etc. She really did come out behind by several hundred dollars a month. She lost free health insurance and instead had to pay $230 a month for her employer-provided health insurance. Her rent associated with her section 8 voucher went up by 30% of the income gain (which is the rule). She lost the ($280 a month) subsidized child care voucher she had for after-school care for her child. She lost around $1600 a year of the EITC. She paid payroll tax on the additional income. Finally, the new job was in Boston, and she lived in a suburb. So now she has $300 a month of additional gas and parking charges. She asked me if she should go back to earning $25,000.


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