Economists love to talk about incentives, but the bottom line is that people hate being controlled or manipulated, even when done through voluntary institutions. This is one of the most important tensions in capitalism.
Interpretation
People resist control and manipulation, even when they agree to it, which presents a challenge within capitalist systems.
In this quote, Tyler Cowen highlights a fundamental contradiction within capitalism: while economists often analyze behavior through the lens of incentives, the reality is that individuals generally dislike being controlled, even when the control is presented in voluntary forms. This tension reveals a critical aspect of human nature and economic interaction, emphasizing that autonomy is a strong motivator, which complicates the efficacy of certain economic incentives and institutions.
In practice
This quote can be used in a discussion on economic policies and the importance of autonomy in decision-making.
If you and your skills are a complement to the computer, your wage and labor market prospects are likely to be cheery. If your skills do not complement the computer, you may want to address that mismatch. Ever more people are starting to fall on one side of the divide or the other. That's why 'average is over.'
The key questions will be: Are you good at working with intelligent machines or not? Are your skills a complement to the skills of the computer, or is the computer doing better without you? Worst of all, are you competing against the computer?
No matter how the financial system is set up, no matter what the economic system is, as long as you have people, you're going to have financial crises; you're going to have bubbles that manifest themselves in the financial system.
Bailing out every bank that fails makes the system riskier, not safer.
Policy makers should be compelled to take action given the serious costs of long-term unemployment when overall unemployment is already high. A week of unemployment is worse when it is experienced as part of a longer spell.
If government manages to establish paper tickets or bank credit as money, as equivalent to gold grams or ounces, then the government, as dominant money-supplier, becomes free to create money costlessly and at will. As a result, this 'inflation' of the money supply destroys the value of the dollar or pound, drives up prices, cripples economic calculation, and hobbles and seriously damages the workings of the market economy.
Markets as well as mobs respond to human emotions; markets as well as mobs can be inflamed to their own destruction.
If you want a simple model for predicting the unemployment rate in the United States over the next few years, here it is: It will be what Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God.
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