Myerson’s Five Economic Reforms Fall Short

Since Charles Cooke’s tweet yesterday, Twitter has been abuzz over Jesse Myerson’s ‘Five Economic Reforms Millenials Should be Fighting For’ article over at Rolling Stone. (Nick Gillespie of Reason has already written a column arguing that Myerson’s article is most properly understood within the broader context of Rolling Stone’s decades-long decline as a source for non-partisan journalism). Readers of this blog have likely already guessed at what some of these reforms might generally include, but I’ll go through them and, in the interest of fairness, try to very briefly summarize Myerson’s arguments.

The first of Myerson’s reforms is “guaranteed work for everybody.” His argument is that unemployment is unpleasant and that it negatively impacts living conditions. Moreover, he claims, a universal guarantee of employment, preferably through the public sector, would allow laborers to hold jobs continuously, transfer from job to job more smoothly (without a temporary, frictional period of unemployment) and work in positions that closely adhere to their own perceptions of where they are most talented and best used. His next suggestion for economic reform, a “universal basic income,” is in some ways related to the former. The idea behind this combination is that the first reform makes sure that jobs are available if you decide that you want one, while the second guarantees that you only work because you want to and not because you need to.

The third reform on Myerson’s list is to “take back the land.” The author claims landlords neither build nor maintain the buildings that they rent out to their tenants, and that land value taxes “targeting” the wealthy would prevent the influential from buying up swaths of land and then leaving them undeveloped. The fourth is to “make everything owned by everybody,” by which the author means that the government should buy stock in private companies and then distribute the earnings annually to its citizens in the form of a check or “social dividend.” This, the author suggests, would help to combat inequality. Lastly, Myerson recommends placing a public bank in each state, which would use tax money to make cheap loans to farmers and other citizens seeking loans for productive ventures.

Obviously, some of what Myerson is recommending is quite radical, and, between welfare, labor, capital allocation, investment, and rent, he covers quite a lot of ground. As such, I’m not even going to attempt to respond fully to the article he’s written. In fact, I’m going to forego commenting at all on reforms 3, 4, and 5, and am just going to offer an observation on the first two.

Although Myerson is obviously correct to identify unemployment as a problem, and one we should be working hard to ameliorate, I can’t help but feel as though his views on labor and employment represent a case of placing the cart before the horse. We generally engage in labor because we perceive that doing so will render out futures less undesirable than they otherwise would have been. If we are stranded on some desert island, we labor to find food and build shelter because we value the leisure foregone in the interim less than the comfort these amenities will provide in the future. The principle is the same in modern economies, but the complexity of these markets and the use of media of exchange (money) allow us to move from satisfying our own immediate needs to satisfying the needs of others. Although we are still free to spend all day hunting in the woods for the dinner we’ll eat tonight, we’ll simply enjoy a higher return on the work day if we spend it providing services or producing goods that other people are willing to purchase from us.

Consider the consequences of this. If certain goods or services are in high demand then the prices that consumers are willing to pay for them will rise. Similarly, if certain jobs require such expertise or are so undesirable that only a handful of people are capable of performing them then the prices paid for their fulfillment will also rise on the market. Discrepancies in pay scale therefore serve a useful function within the economy: they signal to job seekers the areas in which their skills will be most highly valued, incentivize them to provide goods or services that are desired by the members of the community, and ultimately function to allocate time and labor within the market. In other words, people don’t grow up wanting to become tax attorneys, but rather respond to needs of and signals sent by the members of the society around them. No one becomes a janitor because he or she loves trash; they do it because there is a wage premium associated with their undesirable job description.

By guaranteeing employment and income, I fear that Myerson’s first two proposals would have negative implications for this mechanism. A dilution of the labor market with federal jobs aimed at allocating labor without market signals would likely result in a distribution of labor that does not coincide with the desires of consumers; we would be providing services and producing goods that society has not expressed an interest in consuming. By funneling away precious resources such as our time, effort, and labor away from valued ventures and toward ends in which the people around us in society have little interest whatsoever, we’d actually run the risk of making ourselves poorer and worse off as a community. We’d wind up with too much of things that we don’t want, and not enough of the stuff we do want. All labor is not created equal; these are the problems we face when we pursue work for work’s sake.

Is the market process perfect at allocating labor? No, certainly not, and it’s also true that a job search isn’t always akin to an episode of The Price is Right. Many laborers would like to respond to the signals they are being sent by high salaries in law, medicine, and business, but are unable to as a result of poor health, poor education, or a number of socioeconomic realities that ultimately interfere with and preclude them from doing so. The answer to this problem, however, is not to hamper the job market by tampering with its signals, but, as we’ve seen over the past few centuries, to pursue policies, systems, and institutions within society that will allow us to grow and increase wealth, thereby further lowering barriers to access to these desirable goods.

Also, a note: the title of Myerson’s piece itself suggests that millenials should fight to put these reforms into place, yet the article fails to explain why it is that millenials as a group should have more of an interest in doing so than other generations. With the exception of the article’s title and a token reference in the introductory paragraphs, in fact, no mention of millenials or their specific interests occurs throughout more or less the entire piece. On top of both of those things, it’s worth pointing out that “millenial” is just a name we give to people in a certain range of ages, and the label represents a very heterogeneous group. The reforms that Myerson puts forward, just like any reform, would have winners and losers, and it isn’t at all clear that millenials on net would be in the former. It seems likely to me that while some millenials would win, many others would lose. As the Affordable Care Act has helped us to teach us in recent months, we should examine with caution any plan that purports to help large swaths of people while injuring only “the wealthy.”

Myerson is right to be upset at the state of the economy, but he fails to justify the tenets of his economic reform plan according to economic laws and realities. If he really wishes to convince millenials as a group of the value he perceives in these reforms, he should revise his outline with the considerations expressed here in mind.

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One Response to Myerson’s Five Economic Reforms Fall Short

  1. Pingback: More on Myerson: Food for Thought on Sovereign Wealth Funds | Hamsterdam Economics

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