Atlas Shrugged: The Mocking

Monday, March 1, 2010

Alms For The Poor

Megan McArdle posts unusually early to burnish her somewhat tarnished Wise Observer From Above credentials. Today she is being Fair And Balanced about unemployment benefits, and recommends their extension, despite libertarians' hatred of government charity and conservatives' distaste for the poor. But these are special circumstances; the US has been victimized by the Asian savings glut and minority home ownership. The biggest banks accidentally got much bigger, and just happened to siphon off billions of middle-class dollars from unregulated financial activity. And now people are starting to go hungry, a potentially devastating situation for thousands of politicians. Extending employment benefits is not the right thing to do, but it must be done.

The United States has basically the right idea about unemployment benefits. Giving people unemployment assistance has a negative effect on work: the easier it is to stay out of the workforce, the more people will do it. Not only does this up the cost to the public fisc; it also destroys human capital, as skills stagnate. This is a lot of the reason that Europe has historically had high unemployment compared to the US (though there are other issues, and the insurance system is much worse in some countries than others.)

McArdle believes what she is told, the good little authoritarian that she is, and she believes that people act rationally because she was told people act rationally.

The basic idea of rational choice theory is that patterns of behavior in societies reflect the choices made by individuals as they try to maximize their benefits and minimize their costs. In other words, people make decisions about how they should act by comparing the costs and benefits of different courses of action. As a result, patterns of behavior will develop within the society that result from those choices.

The idea of rational choice, where people compare the costs and benefits of certain actions, is easy to see in economic theory. Since people want to get the most useful products at the lowest price, they will judge the benefits of a certain object (for example, how useful is it or how attractive is it) compared to similar objects. Then they will compare prices (or costs). In general, people will choose the object that provides the greatest reward at the lowest cost.

How does this translate after it filters through McArdle's porous head?

Giving people unemployment assistance has a negative effect on work: the easier it is to stay out of the workforce, the more people will do it.

Amazingly, McArdle does not cast her thoughts back to her own experiences, which have always been such a providential source of insight for her. McArdle was miserable when she was unemployed. She had to move in with her parents, watched all her money go to medical expenses, and felt alienated from her free-spending employed friends. When she couldn't find a job in the financial sector, she took a low-paying but dignified and perk-laden job as a writer. But McArdle's unemployment was the elite kind, where the situation is quite clearly temporary and not at all the fault of the unemployed person.

The other classes who make up this kind of employment are more shiftless, and will not work if they can get the generous monthly check from Uncle Sam instead. In Texas that would be between $58 and $392, depending on how much you were earning while employed. Under McArdle's theory, a low-wage earner would weigh having a job against raking in that big $100 a month and choose the money instead. Therefore unemployment benefits are bad.

Fortunately, however, we are in a recession, and we can put aside our scruples and help the poor, just like McArdle was able to put aside her scruples to accept health care from her employer.


Downpuppy said...

Her comment system is so screwed up with multiple posting that nobody seems to have noticed that she just made it all up.

Clever Pseudonym said...

Does Megan really think unemployment compensation is enough to discourage people from trying to find work again? Why does she assume money is the only motivation anyone has to work as well? Or is she projecting when she makes the assumption that a person who is worth enough to not have to work would just be lazy and unproductive? There are those who like to work and do it for non-monetary rewards. I wonder if Megan even believes there exists such a thing.

I also just love her little apology about all the bugs in the re-design. Her defense is that it was put together in a short period of time. Why? It's not like voluntary re-designing of a website has a deadline. They've got no excuse other than lack of professionalism

Susan of Texas said...

Didn't she say that when she was an undergrad, she used to just turn in papers that parroted what the professor said, since that was all those leftist ideologues wanted anyway?

And that when she worked in the financial industry she just pretended to work, since 9/11 put everything on hold?

Mr. Wonderful said...

Is it even worth saying that people often don't make rational choices? In smoking tobacco, in romantic partners, in impulsive acts of consumerism or road rage or etc.?

"Rational choice" implies that people know their own minds. I think most people don't. They "know" what their internal emotional constructs, unconscious fears, and consequent rationalizations tell them, as well as what their peers and their aspirational models tell them.

And then there's the matter of the range of options available within which one makes one's "choice."

And another thing. It just struck me that one of the things that's so intolerable about Megan is her tone. It's a blend of chatty girlfriend, informative teacher's pet, and disingenuous snob. Which wouldn't be so bad, if it weren't, time and time again, used in defense of undeserved privilege, lies, and tendentious explanations of an entirely imaginary world that purports to describe reality (and how to improve it), but which never, ever has anything to do with the actual world.

BillCinSD said...

This whole idea reminds me of WW1 fighter pilots. They were not to be given parachutes because the parachutes were considered cowardly and if they were issued parachutes, the pilots might not fight as hard in the air. The US didn't issue parachutes to fighter pilots until 1919.

Susan of Texas said...

We are all the best of all rational actors in the best of all possible worlds.

spencer said...

I actually teach college economics (hopefully only temporarily). The first thing I tell my students is that most of what I am about to tell them is bullshit because so much of it rests on the flawed understanding of human beings as perfectly rational consumption machines.

I know a lot of these kids will only take the introductory classes, so I want to make sure they understand that there is a lot more to figuring out the way things actually work than drawing a supply and demand graph, and finding the point where the two curves intersect.