Why Tax Breaks Aren’t Bad

23 March, 2010

The economist Robert H Frank in his book ‘The Return of the Economic Naturalist’ completely dismisses the case in favour of tax breaks for the rich (a policy aggressively pursued by the then Bush administration). As far as boosting employment is concerned, he claims, it doesn’t matter what tax rate business owners are paying.

If the addition of another worker to the company is profitable, the entrepreneur will hire him regardless of what tax rate he is paying. This is the decision criterion of the rational utility-maximising capitalist, he says. Although Frank’s logic is extremely elegant, it is ultimately flawed.

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Fair Trade For Some, Poverty For Others

7 March, 2010

Some of you will know that the past two weeks have been  ‘Fairtrade Fortnight’, and today brings the end to an exhaustive media campaign persuading consumers that they should switch over to Fairtrade products.

It’s all very well-meaning, and certainly makes consumers feel good about themselves. But does Fairtrade actually make life better for the poorest farmers in the world? The more ethical policy would be to embrace free trade and stop keeping prices artificially high.

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Do Old Boys’ Clubs Make The Market More Efficient?

2 March, 2010

Companies operate in a world of uncertainty. Candidates for employment can only communicate so much information to differentiate themselves, with the result that firms search for innovative ways to identify talented graduates.

Whether you call it networking, cronyism or simply the Old Boys’ Club – using contacts and connections to obtain an edge in the job market seems necessary in today’s competitive world. Should proponents of meritocracy really condemn such mechanisms?

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Guardians of the Peace?

9 December, 2009

Ireland’s police force, an Garda Síochána, are threatening to take action in light of public pay cuts. Although not legal according to the constitution, past examples of disobedience amongst law enforcement in Ireland include the ‘Blue Flu’ of 1998.

The reality is that no government can properly negotiate with a national police force on even footing, as long as no real alternative exists. Could private security provide the answer? By supplanting national law enforcement, maintaining accountability, promoting competition amongst service providers, and ensuring that society cannot be blackmailed by public workers with the threat of chaos.

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Better Late Than Never

25 July, 2009

Salary The Irish Times reports on remarks made by Minister of State for Labour Affairs, Dara Calleary that suggest a willingness to let firms plead ‘inability to pay’ the minimum wage. Minister for Finance, Brian Lenihan also indicated that such measures may be considered if it becomes clear that it is a barrier to job creation.

Back in April, some arguments for reducing the minimum wage in Ireland were considered here. The debate has taken on new urgency in light of budgetary conditions, as the state is desperate to keep people in jobs and off the dole. Although long overdue, their proposal is far from perfect.

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Lies, Damned Lies and Public-Private Pay Comparisons

11 July, 2009

BooksThe Irish Times comments on the recent report from the Central Statistics Office, stating that public sector wages are 47.6% higher than the private sector. The comparison is entirely meaningless.

Unfortunately, they are right about one thing. Public sector workers are paid far too much, and it’s in danger of bankrupting our state.

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Gambling Wages Away

30 June, 2009

Why is it that wages exhibit backward inertia? How come workers don’t demand that their wages be tied to inflation, and instead just take their chances with fixed nominal wage contracts? In their book Animal Spirits, George Akerlof and Robert Shiller discuss (amongst much else) the phenomenon of ‘money illusion’.

They argue that people are not perfectly rational when it comes to inflationary expectations and consequence wage demands, supported by empirical evidence. However, there may be more conventional explanations for the behaviours they observed.

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