Canadian government to fall

[JimmyCracksCorn]

Originally posted by Max Webster


The only thing I'm fearful of is America's current goverment and the people that support it. America is a great country and I like many things about it.
Why shouldn't America be discussed in this thread. Your our neighbours, your influence is great. It matters to me how our political leaders deal with that influence.

Well, thats a lot more reasonable than what you were saying before.

According to whom? By what scale?

Look at US budget numbers compared to Canadian ones, its not even the same unit of measurement. I think thats what Agathon is saying, not any per capita or percentage based calculations.

[notyoueither]

He also claims a superior standard of living. Based on what?

[Ben Kenobi]

You are operating under a fundamental misconception, Ben. The primary funciton of the tax system is not redistributive. In fact in all countries like Canada, the tax system is not particularly redistributive since higher income earners tend to make more use of public services than lower income earners.

I would challenge that notion, as most of the social programs are essentially redistributive, in the form of welfare, unemployment, etc. The idea is to tax those who make more in order to even out the incomes. That is one of the biggest reasons why our distribution is more even then in the US, and also indicates that our government plays a greater role in the economy here then in the US.

But this is not primarily why we pay tax. We pay tax because markets will fail to provide us with adequate levels of certain goods due to collective action problems, or because we will end up paying too much for certain goods if we pay for them through the market.

In a properly competitive environment, the prices reflect the cost of production. The markets haven't failed to supply the demand of certain goods, we export dramatically more then we consume.

That's why we have a public health system: whatever its deficiencies, it is vastly cheaper and more efficient than private insurance. You can't deny this, it is supported by the facts.

Actually I will contest that. Competition produces efficiency, monopolies waste. Public health care is just another form of monopoly, so I don't see why folks should treat them any different then a private monopoly. There are good arguments in favour for a health care system remaining public, but they have nothing to do with the fact that you are choosing efficiency.

We pay tax to offset the effects of market failure. Unless you know what market failure is and why it happens, you have no business talking about the economic organization of modern states.

With one difference, I do not assume that you are ignorant about a topic, I prefer to address the arguments that you do make. Yes I know something about market failure, and how folks believe that we need to compensate those who suffer from the effects of market failure. However, market failure is a feature of a healthy economy. Inefficient businesses should fail, and be replaced by those who do more business.

The fact that Americans have lower taxes just means that Americans have a preference against organizing the provision of certain goods through the state. They pay for this preference by tolerating ridiculous inefficiencies (like the ridiculous amounts they pay for health care - or their crappy public services).

KH summed it up very well. The US is obsessed with the market based economy. Why this is a bad thing I don't understand at all.

Canada is not a rich country compared to the United States, yet it manages to provide its citizens with a superior standard of living. The current Canadian way is simply more efficient.

Rich in terms of what? Natural resources? We have more then the Americans per capita. If we go by the natural resources, one should expect Canadians to be substantially more wealthier per capita then the US. I don't see how we can say we are more efficient, when the US has seen substantial productivity gains, even as we stagnate.

The political right is simply incapable of admitting that government can contribute to the efficiency of the economy. Problem is, that the government is the #1 contributor of efficiency to the economy.

Which is a bad sign for Canada. The government doesn't produce anything, they are funded by people who do produce things.

Oh, and it's nice to have an issue where I agree fully with NYE

[Ben Kenobi]

Neither is an indicator of what a person with a college/university education can expect to earn.

If you want an indicator for that situation then you need to look at the median average for people with post-secondary educations, or better yet, the median average for people with a similar degree.

The gap in the mean income averages merely indicates a wider income gap in the U.S., i.e. billionaires in the U.S. are better off than in Canada.

If you are never going to be a super wealthy then the mean average difference will not affect you.

Oh, that's very true when the top 20% of Canadians earn much less then their compatriots in the states. 20% of folks graduate with a degree. You do the math.

[Ben Kenobi]

not always...

some start getting paid 20k, and end getting paid 40k..

True, but the majority do very well for themselves.

[Richelieu]

I just heard that Hargrove endorsed the Liberals, saying that a vote for the NDP is basically a vote for the Conservatives.

[Richelieu]

Yep

[notyoueither]

I wonder how that'll play for the NDP in regions where opinions run strongly that the Liberals are currently the largest problem.

[Agathon]

Originally posted by notyoueither

That's why we have a public health system: whatever its deficiencies, it is vastly cheaper and more efficient than private insurance. You can't deny this, it is supported by the facts.

Which facts are those?

The fact that the US was, last time I checked, spending double the percentage of its GDP on health care that Canada was, yet failing to provide health care to about 1/5 of its citizens.

Go look it up for yourself.

Canada is not a rich country compared to the United States, yet it manages to provide its citizens with a superior standard of living. The current Canadian way is simply more efficient.

According to whom? By what scale?

The UNHDI you moron.

You guys need to get with the facts.

Here's your opportunity to show us some. Go ahead. [/QUOTE]

What? Again? Do you dispute that Canadians are on average healthier than Americans? Do you dispute market failure theory.

Probably not, because you don't even know what it is.

[Ramo]

Actually I will contest that. Competition produces efficiency, monopolies waste. Public health care is just another form of monopoly, so I don't see why folks should treat them any different then a private monopoly. There are good arguments in favour for a health care system remaining public, but they have nothing to do with the fact that you are choosing efficiency.

A single payer healthcare system has vastly lower administrative costs than a US-like Balkanized insurance system. Our system is extremely inefficient. If we switched to a single payer system, there'd be easily enough in savings to insure everyone currently uninsured according to various studies (i.e. by the US GAO).

[Agathon]

Originally posted by Ben Kenobi

I would challenge that notion, as most of the social programs are essentially redistributive, in the form of welfare, unemployment, etc. The idea is to tax those who make more in order to even out the incomes. That is one of the biggest reasons why our distribution is more even then in the US, and also indicates that our government plays a greater role in the economy here then in the US.

Then you're daft. That's all I can say. Social programs are essentially insurance programs, just run by the government. All insurance schemes are redistributive - that's the point of insurance. Taxation for welfare is just compulsory insurance (and it has to be to avoid market failures).

The idea is not to tax people more to even out incomes. The idea is to fund services that only government can provide effectively. The fact that Canada has a progressive tax system is because the lower ones income the higher the real cost of taxation. You take 10 bucks from someone who has 100 and it's a big deal. You take 10 bucks from someone who has 1000, not such a big deal.

Come back when you have done some basic economics and have a clue about how modern societies actually work.

In a properly competitive environment, the prices reflect the cost of production. The markets haven't failed to supply the demand of certain goods, we export dramatically more then we consume.

Crap. Markets fail. Please look up market failure in an economics textbook.

Actually I will contest that. Competition produces efficiency, monopolies waste. Public health care is just another form of monopoly, so I don't see why folks should treat them any different then a private monopoly. There are good arguments in favour for a health care system remaining public, but they have nothing to do with the fact that you are choosing efficiency.

Yes they do. You don't know what you are talking about... again. You conservatives are just so mind numbingly ignorant that it beggars belief. Ever heard of a natural monopoly?

Private health insurance generates massive overheads. Why do you think that Americans are moving to HMOs? For the same reason: efficiency. State run health care is even more efficient than these since it can cut down on adverse selection and moral hazard problems much more effectively than private companies can.

Insurance tends to generate massive collective action problems (please look this up, so that you can at least present the appearance of knowing what you are talking about). The tried and tested solution to every collective action problem is to give a third party compulsive authority over the parties creating the problem so that they don't choose the self defeating course and everyone wins. That's why we are compelled to pay tax. Healthcare is an insurance product.

Again... competition does not necessarily produce efficiency. In fact, in certain circumstances it produces massive inefficiencies (called a race to the bottom).

Again I suggest that you and tiger boy actually educate yourselves about this before spouting off about something you know nothing about.

With one difference, I do not assume that you are ignorant about a topic, I prefer to address the arguments that you do make. Yes I know something about market failure, and how folks believe that we need to compensate those who suffer from the effects of market failure. However, market failure is a feature of a healthy economy. Inefficient businesses should fail, and be replaced by those who do more business.

I assume you are ignorant about the topic because you have got it wrong here. Market failure is not inefficient businesses failing - that is part of a successful market. Market failure is defined as when markets do not produce an efficient distribution of goods. It's a completely different thing.

KH summed it up very well. The US is obsessed with the market based economy. Why this is a bad thing I don't understand at all.

Because of market failures.

Rich in terms of what? Natural resources? We have more then the Americans per capita. If we go by the natural resources, one should expect Canadians to be substantially more wealthier per capita then the US. I don't see how we can say we are more efficient, when the US has seen substantial productivity gains, even as we stagnate.

Canada has a higher standard of living than the US.

Which is a bad sign for Canada. The government doesn't produce anything, they are funded by people who do produce things.

Oh for God's sake. How did you ever get a university degree? This is complete crap.

The government makes massive contributions to the efficiency of the economy. In its regulatory capacity alone it makes markets possible. In its capacity as the corrector for market failures it also compels people to pay for services that they want and need, but which a market will not provide at an acceptable level.

This includes health care, education, policing and defense. All things that have significant externalities and are especially subject to market failures: that's why the state provides them. States have provided all sorts of other things for similar reasons. Sometimes circumstances change and markets become possible where they were not before (like when NZ privatized its telecommunications), and sometimes new circumstances create new failures (which entails some form of nationalization or more regulation).

The state produces all sorts of goods. Your statement is typical ill-informed right wing garbage.

You and NYE just don't know what you are talking about.

Get a clue - both of you.

[Agathon]

Originally posted by Ramo


A single payer healthcare system has vastly lower administrative costs than a US-like Balkanized insurance system. Our system is extremely inefficient. If we switched to a single payer system, there'd be easily enough in savings to insure everyone currently uninsured according to various studies (i.e. by the US GAO).

Sshhh Ramo. Don't let reality get in the way of fascist fantasy.

[Agathon]

Here. I'll help you out

economics of market failure

Market failure has become an increasingly important topic for students at A level .There is a clear economic case for government intervention in markets where some form of market failure is taking place. Government can justify this by saying that intervention is in the public interest. Basically market failure occurs when markets do not bring about economic efficiency.

Government intervention occurs when markets are not working optimally i.e. there is a Pareto sub-optimal allocation of resources in a market/industry. In simple terms, the market may not always allocate scarce resources efficiently in a way that achieves the highest total social welfare.

EXAMPLES OF POTENTIAL MARKET FAILURE

There are plenty of reasons why the normal operation of market forces may not lead to economic efficiency.

Public Goods

Public Goods not provided by the free market because of their two main characteristics

Non-excludability where it is not possible to provide a good or service to one person without it thereby being available for others to enjoy
Non-rivalry where the consumption of a good or service by one person will not prevent others from enjoying it
Examples: Street lighting / Lighthouse Protection, Police services, Air defence systems, Roads / motorways, Terrestrial television, Flood defence systems, Public parks & beaches

Because of their nature the private sector is unlikely to be willing and able to provide public goods. The government therefore provides them for collective consumption and finances them through general taxation.

Merit Goods

Merit Goods are those goods and services that the government feels that people left to themselves will under-consume and which therefore ought to be subsidised or provided free at the point of use.

Both the public and private sector of the economy can provide merit goods & services. Consumption of merit goods is thought to generate positive externality effects where the social benefit from consumption exceeds the private benefit.

Examples: Health services, Education, Work Training, Public Libraries, Citizen's Advice, Inoculations

Monopoly

Few modern markets meet the stringent conditions required for a perfectly competitive market. The existence of monopoly power is often thought to create the potential for market failure and a need for intervention to correct for some of the welfare consequences of monopoly power.

The classical economic case against monopoly is that

Price is higher and output is lower under monopoly than in a competitive market
This causes a net economic welfare loss of both consumer and producer surplus
Price > marginal cost - leading to allocative inefficiency and a pareto sub-optimal equilibrium.
Rent seeking behaviour by the monopolist might add to the standard costs of monopoly. This includes high (possibly excessive) amounts of spending on persuasive advertising and marketing.
Libenstein's X-inefficiency may also result if the monopolist allows cost efficiency to drop. An upward drift in costs because of a lack of effective competition in the market-place can lead to consumers facing higher prices and a reduction in their real standard of living
Externalities

Any exam question on market failure must make some reference to externalities. What are the potential market failures arising from externalities?

The social optimum output or level of consumption diverges from the private optimum.

Main problem is the absence of clearly defined property rights for those agents operating in the market. When property rights are not clearly defined, market failure is likely because producers & consumers may not be held to account

Don't forget that positive externalities can also justify intervention if goods are under-consumed (social benefit > private benefit)

Inequality

Market failure can also be caused by the existence of inequality throughout the economy. Wide differences in income and wealth between different groups within our economy leads to a wide gap in living standards between affluent households and those experiencing poverty. Society may come to the view that too much inequality is unacceptable or undesirable.

Note here that value judgements come into play whenever we discuss the distribution of income and wealth in society. The government may decide to intervene to reduce inequality through changes to the tax and benefits system and also specific policies such as the national minimum wage

GOVERNMENT INTERVENTION AND MARKET FAILURE

Government intervention may seek to correct for the distortions created by market failure and to improve the efficiency in the way that markets operate

Pollution taxes to correct for externalities
Taxation of monopoly profits (the Windfall Tax)
Regulation of oligopolies/cartel behaviour
Direct provision of public goods (defence)
Policies to introduce competition into markets (de-regulation)
Price controls for the recently privatised utilities

Now go through most of the things the Government of Canada provides and ask yourself whether they are subject to market failure. Almost all of them are.

Here's an example: charity.

People donate to charities because they value their work. Most people do not like living in a society where people are starving on the street, or where the elderly can't heat their homes properly. Rightly, they think that everyone's lives would be improved if we could rid ourselves of these social evils.

But private charity is subject to market failure. Because every dollar you give to charity benefits everyone else, there is a significant positive externality. Every economics student knows that when there is a positive externality, we will tend to underproduce the good in question. With respect to charity this is because everyone else gets to free ride off of your charitable donations - they get as much benefit from it as you do. The result, people don't give an optimal amount to charity.

Why do you think the government tax subsidizes charities? This is the main reason.

Wouldn't it be better if everyone could be compelled to donate a certain amount to charity? That way everyone would get something they want (a nicer and more decent society) and no potential donor would be able to free ride on the charitable contributions of others.

But wait... that's just what welfare is. Welfare benefits both the people who receive it and the people who pay for it. It's a win win situation. The only reason people moan about it is that they hope that they can get away without paying and not have the bad stuff happen. But that's having your cake and eating it too. We all know what that means.

[Agathon]

Oh and Ben... the reason that churches and other religious organizations have special tax status is that the Government views them as a public good, and realizes that they would be underproduced if left to the market.

[Asher]

One prime example of a Market Failure is Philosophy instructors in public universities. They serve no purpose to society, so without the government funding their paycheques they would be forced to find real, productive jobs for our society. And we can't have that.