Quote of the Day

The politics of compensation is always subject to a problem that economists call “time inconsistency.” Before a new policy – say, a trade agreement – is adopted, beneficiaries have an incentive to promise compensation. Once the policy is in place, they have little interest in following through, either because reversal is costly all around or because the underlying balance of power shifts toward them.

Dani Rodrik

It is a point that I have made many times: Promises to help people hurt by free trade deals are never fulfilled, because along with a loss of jobs and money, there is a loss of political power, and political losers almost never get the spoils.

One comment

  1. An interesting example of this, in Seattle, is our low income housing programs.

    We allow developers to do what they want, if they will add low income house (generally when done), which they never do, or pay a fee — which is wholly inadequate as the housing prices are now driven up and their is no program.

Leave a Reply