Friday, January 30, 2009

Class warfare is a misguided notion in policy making

President Obama has appointed Vice President Biden to create a task force to help the "middle class." Since the definition of "middle class" has been eluding for most, it is unclear exactly who will be helped by the task force. More importantly, it introduces a notion of class warfare and segmentation in the society. It is equally objectionable to those who may not fit the definition because of wealth and to those because of lack of wealth. We have seen classes in many societies - driven by religion, color and economics. A class based society will be, by definition, sub optimal as it will introduce a wedge into solutions that will help all. The right policies are the ones that will increase societal utility as a whole and not favor one class over another. Optimal policies are the ones that target a solution to the problem - the problem being the existence of classes to start with. The question is both why we have poverty and why not all are able to create wealth. The solution is not reinforcement of existing classes but the complete elimination of them through policies that create an environment that allows everyone to work and compete and thus increase societal utility. Compassion alone is not a sufficient condition for better policy making.

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