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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 164.68+6.2%Dec 18 3:59 PM EST
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To: Cary Salsberg who wrote (3342)11/9/1997 9:37:00 PM
From: Sam Citron  Read Replies (1) of 10921
 
Cary,

"I don't doubt that "winners can afford to compensate losers", but in what dream world of yours DO winners ACTUALLY compensate losers?"

Economists seek Pareto optimality, which exists whenever the gains outweigh the losses. It's also called a "positive sum game".

Compensation is nice because it can smooth social tensions and may win votes, but is not strictly required by neoclassical economics, which generally remains aloof from such welfare and distributional issues.

Compensation of losers is sometimes imbedded into policies that consider issues of equity and not merely efficiency. Different governments do different things to soften the blow for "sunset industry" victims. Some subsidize retraining. Others provide welfare.
Some have highly progressive tax codes where almost the entire burden of taxation is borne by the rich.

I don't think losers are ever adequately compensated, but such compensation may in itself create a moral hazard by making people think they may be buffered and insulated from the realities of life and the consequences of their own decisions. I do not presume that people really "decide" on the basis of perfect information to become unskilled laborers rather than C++ or Java programmers. Nevertheless, policy makers consult economists who are paid to think about these kinds of things.

SC
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