Tony Smith wrote:
>> Frankly, I would take your system over the present one
>> anyday. I just think it can be even better if you don't have
>> the restrictions, and let the Invisible Hand do the work.
>
> The problem with the Invisible Hand is it's only in it for the money.

It gets the job done, doesn't it?

> In Australia, there is (or was) a federal government body called the
> Commonwealth Employment Service, its role was to help people find jobs.
> Signing up was a pre-requisite for welfare (unemployment) payments.
>
> One day they decided private enterprise could do it better.  You find 
> people
> jobs, we'll give you a reward.  That system got gamed pretty quick. 
> Helping
> the long-term unemployed was a priority, and thus attracted a bigger 
> $bonus.
> So what you did was keep rejectly the newly unemployed (tiny $bonus) until
> they morphed into long-term unemployed.  "Hey, we've found a job for you 
> at
> last!"
>
> The alternative was to up the churn rate.  Getting someone a job meant a
> $bonus, so with the help of a willing employer, you'd have a continuous
> supply of 1-week jobs.  Why accept a one-off payment for giving someone a
> job for a year, when you could get 52 payments instead?

Thanks for the example. The government was obviously using the wrong metric. 
Very similar to tying public school funds to attendance.

> Another great 'let's give people money' involved houses.  The problem was
> that houses were expensive, and people couldn't afford the great ownership
> dream.  So a once-off payment of $7,500 was given to people to make buying
> their first home easier.  The problem was that house prices immediately 
> shot
> up $15,000.  Ok, let's up the payment to $15,000.  Oopsy, prices now went 
> up
> $30,000!  I was actually doing a project on housing stats at the time, and
> the bloke building the model predicted these rises.  Hilarious.

Yeah, the government should have stayed out of both of these markets. But 
keep in mind that unlike education, they are not positive externalities, so 
the deadweight loss caused by the redistribution of wealth is not offset by 
the benefit.

> Food stamps may work because every has to eat eventually.  But get 
> educated?
> Not so much.  As for your $9,000 education voucher, that'll buy me a nice
> plasma telly and a few slabs of beer.  Ta very much matey.

Who would buy your voucher, matey? Everybody's got their own already.

Vitaliy 

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