Wednesday, February 17, 2010

Is it hypocritical to use a program you oppose?

Not always.

As Greg Mankiw wrote this week, it wasn't illogical for Republican congressman to oppose the federal stimulus and then irrigate some of it into their own districts. This flawed criticism is one of the talking points Obama is repeating this week as we reach the one-year mark of the stimulus plan.

As Mankiw said:

I don't know the facts of the case, but the logic of the Democratic position baffles me. It seems perfectly reasonable to believe (1) that increasing government spending is not the best way to promote economic growth in a depressed economy, and (2) that if the government is going to spend gobs of money, those on whom it is spent will benefit. In this case, the right thing for a congressman to do is to oppose the spending plans, but once the spending is inevitable, to try to ensure that the constituents he represents get their share. So what exactly is the problem?
I have a very personal stake in the principle at hand. I am opposed to the extension in unemployment benefits that the Bush administration endorsed, as well as the increases the Obama administration encouraged. Despite that, when I was laid off I signed up for unemployment. Why isn't that hypocrisy?

For one, it would be a completely irrational course of action. Imagine being forced to buy a lottery ticket. Say the ticket costs $5, the jackpot is exactly $100 but the chances of winning are a paltry one in 1,000. I would never choose to buy that ticket, but if I was forced to by the government, would it make sense to refuse to cash in a winning ticket? No it would not. I'm still opposed to the system and its misplacement of incentives.

Granted, my view on the welfare system didn't survive my unemployment experience. My position had been that social programs like welfare, unemployment and disability benefit too many scammers. Not only do we have to pay for these people, but we also lose the taxes that they would otherwise pay.

I still believe that, but I was wrong to think there most of these people are gaming the public system. That's not the right way to look at this problem, because it assumes people are on welfare systems for the wrong reason. People are not on welfare because they are lazy; they are on it because they are smart.

As Milton Friedman explained on his Free To Choose miniseries, when you get a weekly paycheck for not working, it's irrational to take a job that pays less than that free paycheck. If you work, you lose the government assistance. Even a job that pays the same amount is off limits, because you'd be working for free.

But that doesn't mean any job that pays more than the government benefits is worth taking.

Let's say a person gets $300 a week for not working, and is offered a job that pays $400 and requires 40 hours a week.

Normally, we would say that job pays $10 an hour. However, because the cost of something is what you give up to have it, the wage of our subject is really $2.50 an hour. They will lose the $300 weekly government paycheck that required zero hours of work a week. In addition, they also have commute times and transportation costs like gasoline to factor in.

It's easy to see why someone with a lengthy promise of unemployment benefits would be encouraged to stay on it when faced with such an equation. If that person opposes the government program but still accepts the money offered, it doesn't mean they're hypocritical or lazy. It means they're smart.


  1. If a person leaves one job for another job, whether that new job is of a lesser or higher pay than the old one, she doesn’t take the difference in wages between the two, and count that as what she is making. If her old job paid 20.00/hr, and her new one 21.00, she wouldn’t think of her new job as only making 1.00/hr. It would be what it is: 21.00/hr.

    While it is true that the cost of something is what you give up to have it, to simply take the monetary difference between the two jobs/employment states into account is not enough. There are other factors involved that are non-monetary, non-concrete factors. In fact, the only legitimate consideration to take into account would be the amount of satisfaction provided by the one over the other.

    In comparing the unemployment benefits that paid 300.00/week with the job that paid 400.00/wk, getting 100.00 more a week would certainly provide some satisfaction. The feeling of self-respect and the garnering of the respect of others would provide additional satisfaction. Then there are such things the quality of enjoyment of the job, career-enhancing opportunities it enables, pleasant work environment, and fringe benefits. With all these things factored in, the new job might be worth much more than the old one.

  2. Your example ignores the important transition from working to not working. Your $20/$21 example is going from one job to another, possibly 40 hours to 40 hours a week. My example goes from working zero hours a week to 40.

    Your reliance on pride and self esteem to get people to work sounds like the framework for a command economy. That's been tried before, but those systems ended up relying on bullets and gulags to inspire people to work instead.

  3. I'm just saying there are other job compensatory factors that are non-monetary ones, that are the most relevant ones, namely job satisfaction. The fact that our society places a stigma, however right or wrong, on being unemployed, creates dissatisfaction in life, caused by lowered self-respect. This dissatisfaction must be factored in as what that job is actually worth.

  4. I think it might be completely rationale to be a hypocrite, but collecting money from a system you don't believe in, and don't believe others are entitled to, smacks of hypocrisy. I don't think it can hide behind a label of rationality . . .

    But I suppose your retort would be either 1) I don't care that it's hypocritical because it it's to my benefit; 2) i don't care that it's hypocritical because hypocrisy doesn't undermine by contention that unemployment wages are bad; or 3) it's not hypocritical.

    If you became ill and couldn't work would you collect disability? Sounds like you would.

    If an illness occurred that you could not pay for, would you go to the hospital anyway? (it would be irrational otherwise, right? Death . . rationale?)

    If said illness forced you into bankruptcy and you lost your house, would you accept section 8 housing/payments?

    If said illness/bankruptcy left you homeless and unable to work, would you accept welfare?

    I am not trying to be flip, I would truly like to know what you would do. And I do think that accepting unemployment undermines your argument against it; as does accepting pork for your district while espousing some type of conservative moral high ground.

    Eating your cake and having it too?


  5. I don't think you understood my central example, as all of these amount to the same thing.

    In effect, I was forced to buy a bad insurance policy - unemployment. I didn't think the payments I was forced to make were low enough to line up with the amount in the unemployment checks. I also have a problem with the incentives this program introduces. However, I was not given a choice and had to pay for it.

    While on unemployment, I was opposed to expansions and extensions to the program. Isn't this the opposite of hypocrisy? I think true hypocrisy would be to oppose these programs, but once going on them to advocate for their expansions or to turn around and argue in their support.

  6. Thanks for the link Michael. If I'd seen this before, I'd feel guilty for copying the idea; thankfully I hadn't so I guess great minds, and all.

    The two points that I would add to yours (a year after the fact):

    1) Jennifer, you refer to other compensatory factors, but what about additional cost factors. Returning to work has a cost, perhaps in day care or gasoline. Anyone switching from unemployed to employed must incorporate those additional costs simply to break-even on a new job.

    2) The expiration of benefits will also be a factor. If my benefits expire in 30 days, I'm more inclined to take the next job I'm offered than if I have 6 more months of benefits coming. In that case, I'll wait for the job I want at the pay I want before leaving the comfort of my home. This is the primary reason indefinite extensions of unemployment benefits are economically damaging.