Wednesday, September 25, 2013

Political Economy

I added two political links, politico.com and politicalcalculations.com, to the blog list to emphasize the importance and inseparable nature of politics and economics. The economy determines how much wealth is produced, but politics determines how it is distributed.

Glaring examples are tax law (mortgage deductions, business expenses, earned income credit), accounting rules, fiscal stimulus, austerity, farm and oil subsidies, military contracts, section 8 housing, SNAP (food stamps), unemployment, ACA, etc. Governments at all levels shape laws to encourage or punish behavior as they see fit. Laws are used as social engineering tools with big economic consequences for the political winners and losers.

The best tracking charts and forecasts on the economy can tell you something about the size of the pie, but not much about how the pie is distributed.

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