Very interesting policy framework this time. Am I correct in thinking that while error by omission seems more evil, error by commission is worse in the long term because it diverts valuable public funds that could be of better use elsewhere?
I still can't believe this newsletter is free. thank you.
On the error of omission and the error of commission: A long comment 🙈 (from the perspective of the State)
What is an error of omission? I would define it as: Excluding individuals who cannot afford a service at 3x the market price (when the MCPF is 3).
If this is a valid definition, then excluding people who can afford a service at 2x the market price is actually not an error of omission!
Also, accounting for the inefficiencies in public spending would take the minimum threshold for an error of omission to >3x.
On the other hand, the error of commission could lead to insidious consequences. As the government spends more it would be compelled to tax more. Bad taxes would then lead to more inefficiencies. As a result MCPF would further increase making the future public spending less efficient.
Besides the nature of these errors, the capability of the State also matters.
The government may think that its citizens need a service and the citizens may expect the government to provide the service. But the decision to provide the service would involve other factors also. E.g., resource constraints, capacity/administrative constraints etc. If the government lacks the capacity to provide the service, then it should back off. Instead, if the government decides to go ahead with the policy choice it commits an error of commission. Doing anything beyond the State capacity would qualify as an error of commission.
When the citizens demand a service (needy citizens) that the State cannot provide, citizens rob the State of its capacity. This is an example for the voter rationality constraint.
When the government thinks that its citizens need a service when they didn’t demand for it, the government does so because it either fails to acknowledge or be aware of the information constraints.
Any policy that doesn’t take into account the constraints to State action would be a bad policy.
For me debate around loudspeaker ban in my country is much more important than two foreign countries fighting each other. The discussions around loudspeaker ban will draw/firm-up the boundaries of liberty and personal rights.
Very interesting policy framework this time. Am I correct in thinking that while error by omission seems more evil, error by commission is worse in the long term because it diverts valuable public funds that could be of better use elsewhere?
I still can't believe this newsletter is free. thank you.
The error of commission is three times costlier than the error of omission, blame MCPF.
This was a great read. Thanks!
On the error of omission and the error of commission: A long comment 🙈 (from the perspective of the State)
What is an error of omission? I would define it as: Excluding individuals who cannot afford a service at 3x the market price (when the MCPF is 3).
If this is a valid definition, then excluding people who can afford a service at 2x the market price is actually not an error of omission!
Also, accounting for the inefficiencies in public spending would take the minimum threshold for an error of omission to >3x.
On the other hand, the error of commission could lead to insidious consequences. As the government spends more it would be compelled to tax more. Bad taxes would then lead to more inefficiencies. As a result MCPF would further increase making the future public spending less efficient.
Besides the nature of these errors, the capability of the State also matters.
The government may think that its citizens need a service and the citizens may expect the government to provide the service. But the decision to provide the service would involve other factors also. E.g., resource constraints, capacity/administrative constraints etc. If the government lacks the capacity to provide the service, then it should back off. Instead, if the government decides to go ahead with the policy choice it commits an error of commission. Doing anything beyond the State capacity would qualify as an error of commission.
When the citizens demand a service (needy citizens) that the State cannot provide, citizens rob the State of its capacity. This is an example for the voter rationality constraint.
When the government thinks that its citizens need a service when they didn’t demand for it, the government does so because it either fails to acknowledge or be aware of the information constraints.
Any policy that doesn’t take into account the constraints to State action would be a bad policy.
A rate of inflation that’s higher than government bond yields will pare down the debt to GDP ratio and allow it to fund more welfare schemes.
Can you explain this.?
For me debate around loudspeaker ban in my country is much more important than two foreign countries fighting each other. The discussions around loudspeaker ban will draw/firm-up the boundaries of liberty and personal rights.