Incentives Matter
A great talk given by John Cochrane
Highlights
Economic Freedom - provide optimal incentives and let markets work with transparency.
Economic Control - maximize and control redistribution distorting incentives.
The current system distorts markets and is inefficient but there are a lot of people who profit from the current dysfunction and are able to bend legislation and regulation their way.
Focus on, and fix the incentives.
Taxes? To raise revenue for the government with minimal economic damage, junk the current system and enact a simple consumption tax.
Social programs? People often lose more than a dollar of benefits for each dollar they earn. Fix the disincentives, and we will help more people with less money.
US health care and insurance? Health care and insurance can be private, fiercely competitive, and innovative. Provide for the poor with voucher of state support, but do not screw up your and my health to do it.
Financial bailouts? Equity financed banking and narrow deposit taking can end private sector financial crises forever.
Climate? If you must, a carbon tax or tradable right, instead of massive crony subsidies and vanity projects, which do not save carbon. (If I buy an electric car, that just frees up gas for you to use.)
Housing? Let them build.
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