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From:
[log in to unmask] (James C.W. Ahiakpor)
Date:
Sun May 7 10:09:22 2006
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I was hoping with my questions to motivate Sumitra Shah to rethink her  
position regarding childcare, eldercare, and the usefulness of  
attempting to impute values to home production.  Her response shows that  
I failed.  Let me restate the conclusions to which I was trying to  
direct her.  
  
First, neither childcare nor eldercare qualify as public goods, properly  
defined.  We have two criteria (in economics) for them, namely (a) joint  
consumption -- vertical addition of individual demand curves -- and (b)  
difficulty of excluding from their consumption those who would not pay.  
  An excellent example of a public good is thus national defense.  
"Public [school] education" does not qualify either.  
  
Besides, childcare and eldercare are services produced by those who  
employ their capitals (funds devoted to earning profits) and labor in  
such enterprises.  Unless they received enough compensation for their  
services, they would be inclined to direct their capitals and labor  
elsewhere.  Talking about making such services "affordable" does not get  
at the economics of the situation; much too imaginary.  Besides, for the  
government to subsidize their consumption, taxes must be raised to pay  
for them.  And taxes have their opportunity costs in terms of those  
things that do not get produced as a result.  
  
On interpersonal comparisons, I think only those who do not recognize  
the degree of presumption involved would be inclined to think that they  
can feel exactly what someone else feels.  The adage, beauty is in the  
eyes of the beholder is quite apt, in this regard.  Adam Smith's use of  
empathy as a *moderator* of individual actions (in public) must not be  
confused with this.  In fact, Smith also warns in the Wealth of Nation  
against the folly and presumption (Hayek would call conceit) of law  
givers to direct the use or investments of other people's property,  
employing precisely this point.  In Smith's own words: "What is the  
species of domestic industry which his capital can employ, and of which  
the produce is likely to be of the greatest value, every individual, it  
is evident, can, in his local situation, judge much better than any  
statesman or lawgiver can do for him. The statesman, who should attempt  
to direct private people in what manner they ought to employ their  
capitals, would not only load himself with a most unnecessary attention,  
but assume an authority which could safely be trusted, not only to no  
single person, but to no counsel or senate whatever, and which would  
nowhere be so dangerous as in the hands of a man who had folly and  
presumption enough to fancy himself fit to exercise it."  This is miles  
away from Shah's view that "A better management through the public  
sector will improve total economic welfare," I submit.  
  
Voluntary exchange or laissez faire is thus a better guarantor of the  
overall betterment of the public than government management of otherwise  
private resources.  Long before he wrote the Wealth of Nations, Smith  
also argued: "Little else is requisite to carry a state to the highest  
degree of opulence from the lowest barbarism but peace, easy taxes, and  
a tolerable administration of justice: all the rest being brought about  
by the natural course of things."  Would that we paid careful attention  
to his views rather than attempt to extract from Smith that which he  
opposed.  
  
  
James Ahiakpor  
  

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