<!doctype html public "-//W3C//DTD W3 HTML//EN"> <html><head><style type="text/css"></style><title>Re: [lbo-talk] Socialism by any other name?</title></head><body> <div>At 10:48 PM -0700 10/6/03, Gar Lipow wrote:</div> <div><br></div> <blockquote type="cite" cite> Bill Bartlett <billbartlett@enterprize.net.au> Forwarded<br> </blockquote> <blockquote type="cite" cite>Shiller could be a crackpot writing letters to newspapers. In fact, he's a professor of finance at Yale University.<br> </blockquote> <blockquote type="cite" cite>The two are not neccesarily mutually exclusive.</blockquote> <div><br></div> <div>Very true. But I thought the sentence following that was more intriguing:</div> <div><br></div> <blockquote>"He's the celebrated author of Irrational Exuberance, in which he pooh-poohed the New  Economy and warned that Wall Street's boom couldn't last."</blockquote> <blockquote><br></blockquote> <div>Gee, you mean he actually PREDICTED that a stock market boom would eventually come to an end? Wow, that puts him right up there with the prophets, who would have ever thought that prediction might come true.</div> <div><br></div> <div>But it probably says more about the journalist than the interestingly named Shiller, who also seems oblivious to the supposed  "endowment effect", in his reported proposal for "livelihood insurance". Gitten reported on the proposal thus:</div> <div><br></div> <blockquote>"Such "livelihood insurance" would require the development of many</blockquote> <blockquote>indexes for the growth in average salaries paid to people in</blockquote> <blockquote>particular occupations. So the policy for an employed male architect,</blockquote> <blockquote>for instance, might involve him being reimbursed by the insurance</blockquote> <blockquote>company for half the gap between his salary and the average salary</blockquote> <blockquote>for architects. This would leave him with an incentive to work hard</blockquote> <blockquote>in his career and thus would overcome the "moral hazard" problem that</blockquote> <blockquote>comes with all insurance - the temptation to stop trying once you're</blockquote> <blockquote>covered."</blockquote> <blockquote><br></blockquote> <div>Of course this whole "moral hazard" crap assumes that the only motivation people could ever have for engaging in useful work is money, which is ridiculous on the face of it. But even given (for the sake of argument) that it was true - the  "endowment effect" doctrine tells us that the said architect will value the insurance payout of 50% of the difference between his low salary (which he already has) far more that the 100% which he could get by working hard. So the gap between insurance guaranteed income and potential income for busting your gut and grovelling to the employer won't be enough of a disincentive to maintain labour discipline. Any such livelihood insurance undermines thus the essential premise of the capitalist system - the threat of hunger and want if you don't toe the bosses' line.</div> <div><br></div> <div>I'm sure this Shill fellow is well intentioned, but he simply doesn't know his arse from his elbow. Hasn't got a clue. Tragic, but that's professional economists for you.</div> <div><br></div> <div>Bill Bartlett</div> <div>Bracknell Tas</div> </body> </html>