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Quadrini is interesting, gonna take some time, so I come back to that later. [/QUOTE]
If anyone wants to read his theoretical argument. Macroeconomic models often use a representative household, which is essentially the same as saying you can capture what is going on just by looking at the average household. A more formal proof treatment of this idea can be found in Krusell and Smith. They did a version of a typical simple DSGE model, but with infinitely many types of households and they don't find much difference with the representative household version. There is a reason for this. To get a whole distribution of people, you need them to face unique shocks and you need to not allow them to insure themselves perfectly against it. If you do only that, the only real motivation for wealth accumulation is self-insurance (i.e., they use savings as a buffer in case of unemployment). As such, everybody tends to bundle up in the middle of the wealth distribution.
To get more realistic effects and make the heterogeneity of households meaningful, you need to push people up or push people down. Welfare policies can radically cut the savings of poorer people in the model and opportunities to get higher returns that hinge on accumulating enough capital like entrepreneurship gives some people a reason to save more. Quadrini is an early example of the later. Moreover, as a small note, if I recall, he doesn't study the business cycle. He studies the cross-section of wealth, so he focuses on the steady-state distribution: people move up and down in the distribution, but the shape of the distribution remains the same one quarter after the next.
One issue with this picture is twofold. (1) I just showed you data indicating that depending on what kind of choices you make you effectively can move up the wealth ladder in the United States. (2) While I do not have the data, I do know Jordan Peterson, a UofT psychologist, often pointed out academic performances, as well as income, are highly correlated with IQ in places like Canada and the US. This indicates to me that there is some significant component of performance that influences life outcomes. And it is no wonder. If you own a business and you're too dumb to see someone can become extremely productive, some of your competitors might and there are only so many of those mistakes you can make before it starts being a drag on your bottom line.
Actually, you can put a price tag on everything in a way that takes into account the behavior of people. The value you ascribe to anything is whatever you are disposed to forgo in order to acquire it. Your choices, because they involve sacrifices, implicitly put a price tag on everything. Moreover, the only way you're going to be able to aggregate different degrees of success in reaching the very many goals about which you care, including "social values," is by assigning them different weights and summing them up, or something tantamount to this. And that's what cost-benefit analysis does. That it expresses things in dollars or doughnuts is irrelevant.
If anyone wants to read his theoretical argument. Macroeconomic models often use a representative household, which is essentially the same as saying you can capture what is going on just by looking at the average household. A more formal proof treatment of this idea can be found in Krusell and Smith. They did a version of a typical simple DSGE model, but with infinitely many types of households and they don't find much difference with the representative household version. There is a reason for this. To get a whole distribution of people, you need them to face unique shocks and you need to not allow them to insure themselves perfectly against it. If you do only that, the only real motivation for wealth accumulation is self-insurance (i.e., they use savings as a buffer in case of unemployment). As such, everybody tends to bundle up in the middle of the wealth distribution.
To get more realistic effects and make the heterogeneity of households meaningful, you need to push people up or push people down. Welfare policies can radically cut the savings of poorer people in the model and opportunities to get higher returns that hinge on accumulating enough capital like entrepreneurship gives some people a reason to save more. Quadrini is an early example of the later. Moreover, as a small note, if I recall, he doesn't study the business cycle. He studies the cross-section of wealth, so he focuses on the steady-state distribution: people move up and down in the distribution, but the shape of the distribution remains the same one quarter after the next.
One issue with this picture is twofold. (1) I just showed you data indicating that depending on what kind of choices you make you effectively can move up the wealth ladder in the United States. (2) While I do not have the data, I do know Jordan Peterson, a UofT psychologist, often pointed out academic performances, as well as income, are highly correlated with IQ in places like Canada and the US. This indicates to me that there is some significant component of performance that influences life outcomes. And it is no wonder. If you own a business and you're too dumb to see someone can become extremely productive, some of your competitors might and there are only so many of those mistakes you can make before it starts being a drag on your bottom line.
Actually, you can put a price tag on everything in a way that takes into account the behavior of people. The value you ascribe to anything is whatever you are disposed to forgo in order to acquire it. Your choices, because they involve sacrifices, implicitly put a price tag on everything. Moreover, the only way you're going to be able to aggregate different degrees of success in reaching the very many goals about which you care, including "social values," is by assigning them different weights and summing them up, or something tantamount to this. And that's what cost-benefit analysis does. That it expresses things in dollars or doughnuts is irrelevant.
