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Good Karma: How to Find it in a Political Economy.

August 28, 2009

Most people think Karma means “what goes around comes around”, while that is often the case, the actual meaning of Karma is “cause and effect”.

There are no problems without a root cause.

For example, we have crime, what is the root cause? Criminals’ expected benefits from crime exceed their expected benefits from their next best option. This offers two possible solutions: reduce their expected benefit from crime, or increase their expected benefit from alternatives. There are (infinite) more expamples. Shoes eventually wear out, because friction rubs some of the material off the bottom of them when we walk; the solution might be better floors and sidewalks, better shoes, or simply replacing our old shoes. The latter option is the most efficient option (given current levels of wealth, preferences and technology).

Sometimes a cause has many direct and indirect effects, which subsequently cause even more effects. The roots may run very deep. Naturally, not all effects are bad, but necessarily all effects have a cost.

Teen unemployment rates (and especially unemployment rates for Black and Hispanic teens) are very high but were not always so. The root cause has to be something that changed before the change in patterns. One possible cause could be a change in minimum wage laws. An increase in the minimum wage would make employing teens relatively less attractive to employers. Other factors may make this effect especially problematic for minorities.  Here‘s a discussion of this problem (with real data). In this case, the cause is easy to identify, but what caused the cause?

We may know how to handle minimum wage issues, but why do we face these issues at all? Education of voters and legislators and lobbying by unions come to mind, but these explanations aren’t adequate. Education would be simple, but how do we get everyone to take a labor economics course? Lobbying counter-acts education in many cases, but we need to ask why lobbying happens.

Another problem is copyright law and the bad behavior it inspires. The root cause of this is our legal system–specifically tort law. Our current system is a common pool that creates gross inefficiencies, as well as significant cash flow for lawyers and a major advantage for players with deep pockets. See Bruce Benson for a thorough discussion of this .

The root cause of this is our legislative system. The law is a a common pool as well. The people who decide the way tort law works are congressmen, many of whom are lawyers (perhaps this is the greatest example of regulatory capture). Special interests also have a strong incentive to support the current system, because special interests are typically large companies that already exist (this is important: a law that is passed that props up an existing industry makes it that much harder for a new industry to replace it; the new industry was not able to lobby against the law that prevented its existence).

Of course, we could go even further, eventually ending up in a philosophy department somewhere. That discussion will require more beer so I’ll leave it alone for now.

It seems clear to me that there is a significant problem with the way our government handles legislation; can any readers think of a way to improve this situation (besides bloody revolution)?

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