What would happen if we imposed the discipline of the market on the ideas of those whose mantra is 'competitiveness'? More precisely, how willing would *investors* be in literally buying into policy ideas like the "laffer curve", the the 'natural' or non-accelerating inflation rate of unemployment (NAIRU), or IMF 'structural adjustment'? If there was a futures market in these ideas how many supply-side prophets and pundits would be willing to put their money where their mouth is? We may have a chance to find out. Canada's C.D. Howe Institute is one of those ubiquitous corporate-sponsored think tanks that have sprung up to extoll the virtues of the free market and to lobby governments for tax breaks for the wealthy and barriers to trade union activity. Over the past several years, C.D. Howe has published a series of book length supply-side tracts under the series title of "The Social Policy Challenge. William G. Watson is co-editor of the series and a frank advocate of right-wing economic policies. I have engaged in two email debates with Bill Watson (he's also a fun guy to debate with) and two days ago challenged him to a $100,000 wager that I can develop a workable, non-coercive, non-inflationary and revenue neutral plan to lower unemployment by redistributing overtime work to create new jobs. I am awaiting his reply. Essentially, the wager would work like a futures market. My wager with Bill would form the initial capitalization for a policy idea company whose stock could then trade on the market like any other publicly held company. Perhaps Doug Henwood could offer some technical suggestions? I realize the concept of an Ideas Futures market is not orthodox Marxism, but then I've never claimed to be orthodox. Robin Hanson of Cal Tech pioneered the Ideas Future market. Last year, Robin was involved in an essay contest on "Privatization: has it gone far enough?" that Michael Perelman was kind enough to publicize on the PEN-L list. I entered the contest and won the $1000 prize. Now I'd like to up the ante to something really worthwhile! Below is my message to Bill Watson challenging him to the wager: Bill Watson (editor of the C.D. Howe Institute's Social Policy Challenge series) raised some thoughtful caveats to my suggestion that removing ceilings on payroll taxes may help reduce unemployment. Bill's objections shouldn't be hard to accomodate, where appropriate. I'll go through them in the order he raised them. (Bill's caveats are included in full at the bottom of this message). 1. I agree that payroll taxes are not the only, or the most substantial fixed, non-wage costs of labour. They are one component over which the government has clear jurisdiction and can act decisively. Changes in the fixed cost structure of payroll taxes could provide a model for revising other fixed, benefit plans and federal action could signal to employers, unions and insurance companies that 'hours neutral' benefit plans are on the agenda. 2. As you point out, it would be hard to say how much of a boost in employment would result from removing ceilingsb hb on payroll taxes. The effect would be gradual and indirect, just as the effect of ceilings has been gradual and indirect. This is one of the features of the proposal that appeals to me -- no 'big bang', just 'getting better all the time'. 3. It's questionable whether firms "would have to", or even *could*, raise prices as a result of eliminating the tax-free status of overtime -- y'know, global competition and all that. It _is_ management's job to look at their cost structures and adjust the way they operate to minimize those costs. If they're simply absorbing the costs and trying to pass them on, they're not doing their job. Can 'em. 4. I can't agree that "all labour would be more expensive" after the removal of payroll tax ceilings. In fact, removal of the ceilings could allow for lowering overall rates and, thus, cheapening low-wage labour. It's not clear to me why high-income earners deserve to be subsidized by low-income earners -- other than that those who perform high-income labour are better able to influence the political decision-makers. 5. Linkage between benefits and contributions is the most substantial objection to removing the ceilings. I have three comments on this issue. First, linkage, as it is presently enforced, is entirely hypothetical -- in practice there isn't much real connection between what people pay into programs and what they get out. I'll restrict myself to one example: after 13 continuous years employed in the high performance auto parts industry my neighbour was laid off and is entitled to 42 weeks "employment" insurance benefits, the same as if he'd worked, and contributed for a year. Second, if the linkage between an employee's contributions and benefits is hypothetical, the linkage between an _employer's_ contribution and the employee's benefit level is even more tenuous. I've heard vague arguments about employers benefiting from a "more stable labour force", I've never seen the issue of ceilings addressed specifically in terms of linkage between the benefits received by employers and the payroll taxes paid by them. Hey, I'm easy, keep the ceiling on employees' contributions if you want, just remove the corresponding ceiling on employers' payroll taxes, please. And, finally, I have to express wonder at the proposition that we *must* perpetuate a grievous -- even if unintentional -- inequity on the substantive issue of distributing work in order to avoid transgressing a minor technical principle of actuarial equity in the setting of premiums and benefits. Do the terms, 'negligence', 'malpractice', 'iatrogenic' have any meaning with regard to public policy? They should. 6. Super RRSPs? I don't really know what super RRSPs have to do with my proposal other than that they might be suggested as a 'poison pill' I can't swallow thus allowing Bill to gracefully slip out of his (possibly facetious?) offer to endorse my suggestion. I'll just say what I think of super RRSPs: super -- if you've got lots of disposable income. Not so hot as a *social insurance* scheme. Of course, if you're philosophically against social insurance, well why don't you just come right out and say so, it's a free country. In conclusion, although I've tried to respond to Bill Watson's caveats, I suspect that I still won't receive his endorsement. But perhaps there is a way to break the deadlock -- a bet. I'll bet Bill Watson $100,000 (Cdn) that my proposal can be refined into a workable plan to reduce unemployment in Canada. The details of the wager would, of course, have to been negotiated with regard to time frame and adjudication of results, and be subject to legality and arrangement of financing. But we should be able to work that out. I want to emphasize that this challenge is made with utmost seriousness. I'm confident the bet's a sure thing. A year and a half ago, I was invited to prepare a proposal for research to develop policy options for creating jobs by redistributing work. Funding for that project was dropped in the wake of a government spending freeze. But I've continued with the project, unfunded. I've got all the parts, now all I've got to do is put it together, which will require funding -- what better way to finance policy research than with the proceeds from a bet? Nor is the idea of a wager itself frivolous. I got the idea (along with a $1000 prize for an essay on privitization, but that's another story) from Robin Hanson who conceived the Ideas Futures market (see: http://hss.caltech.edu/~hanson/ideafutures.html) Here's a description from Hanson: "The Idea: Our policy-makers and media rely too much on the "expert" advice of a self-interested insider's club of pundits and big-shot academics. These pundits are rewarded too much for telling good stories, and for supporting each other, rather than for being "right". Instead, let us create betting markets on most controversial questions, and treat the current market odds as our best expert consensus. The real experts (maybe you), would then be rewarded for their contributions, while clueless pundits would learn to stay away. In fact, you should have a free-speech right to bet on political questions in policy markets." Bill Watson wrote: >Dear Tom: I do think the ceilings have an effect. And I'd support >proposals to remove them, subject (naturally) to a couple of caveats. > First, even without ceilings there still would be a fixed cost to >hiring people, so it's hard to say exacly what boost in employment >you'd get. You can't just take existing overtime and divide by >whatever number of hours you think constitutes a regular work week. >There may be a change in the number of hours of work available as a >result of the change in the effective price of labour. Overtime is >no longer tax-free; firms may have to raise prices as a result; if >they raise prices, they may get less of the market. Second, >even if there's no change on the output side, there may be a >change in how employers wish to produce things. There would be no >more tax-free labour. All labour would be more expensive, not just >regular-time labour. Maybe that will further the pressure to replace >labour with capital. Third, most of the programmes that have >ceilings on contributions also have ceilings on benefits. Would you >remove these, too? Or would you just allow people to pay taxes with >no prospect of benefit? Fourth, the problem with many of these >programmes is precisely that there is no connection between what >people put in and what they take out. If it's an insurance >programme, maybe that's OK. Not everyone wants to get a payout from >their fire insurance policy. But if it's something like CPP, which >is supposed to be a savings plan, that's another question. Why not >maximize the connection between what is paid in and what is paid out >by replacing CPP with Super RRSPs, as a certain political party has >just proposed, under which contributions would be voluntary but funds >would be privately managed and would have the contributor's name on >them. People might even stop regarding these taxes as taxes, since >they would clearly increase people's net worth. > If you agree to all this, maybe you'll get me to endorse your >plan. Cheers, Bill Watson Regards, Tom Walker, [EMAIL PROTECTED], (604) 669-3286 The TimeWork Web: http://mindlink.net/knowware/worksite.htm
