Populist Economics

Ezra Klein has a post up in which he argues that new entitlement programs would promote entrepreneurship and economic growth:

On risk, I've been slapping this donkey for awhile, and have only grown more convinced that it's the right move to make. The role of the government should be to grease the market and reduce risk to the worker. Universal Health Care, Social Security, universal day care -- all this needs to be implemented so workers aren't tied down to a particular job and stuck in a situation that doesn't fully utilize their abilities. Further, if the government takes responsibility for security, Americans have the freedom to be entrepreneurs. Anyone want to argue the good of entrepreneurship? Thought not.

There is a degree of validity to this argument. I am willing to entertain the notion that some of our wealth transferring programs provide a net gain to the economy. Certainly, reduction of risk is something that can promote risk taking and therefore economic growth. That being said, Ezra fails to make that case here. First off is the simple fact that the money has to come from somewhere. Any money spent on Universal Health Care, or universal day care is money that isn't being spent somewhere else. Unless you can prove that economic growth from the entitlement is greater than what you would get if that money was spent in the ways people would otherwise choose to spend it, you havn't even begun to address this issue. Now, I suppose you could argue that the money is being spent on these activities in any event so the net cost would be zero. This would require a basic premise that government is at least as efficient in allocating resources as the private sector is. Something I find laughable, but perhaps someone could prove me wrong. I expect that there would be a net economic loss due to the implementation of these programs, partially because I am convinced that government is less efficient than the private sector. Even more significant is this basic fact: any such schemes would be based upon a transfer of wealth from rich to poor. This would of course entail taking resources from people who have proven themselves to be successful entreprenuers and giving it to those who are, at best, unproven. This doesn't seem like a smart business practice to me. Moral cases for the programs can be made, arguing that the cost is worth it, but I don't think that a very good economic case can be made. Update: Matt Singer has posted on this and offered some criticisms of my ideas. He hasn't convinced me, but I believe that all arguments should be heard.