Skip to content

A Better Economic System

A fascinating article in Time Magazine talks about ways that cities are changing their economic systems. They focus on Amsterdam, but it turns out that there are cities all over the world that are doing this.

This is related to the rise of “B Corporations“. Most corporations are “C Corporations” (although there are also “S Corporations”, and various forms of co-operatives). The rules and laws for each of these are different.

B Corps are a recent innovation, and the reason they were developed is because corporations are completely focused on making money for their shareholders. In particular, it is difficult for corporations to take into account “externalities“. Externalities include the environment (both pollution and the using up of scarce resources).

B Corporations attempt to make the price of a product or service reflect the true costs and benefits of that product or service for society as a whole. For example, a carbon tax increases the cost of a product to reflect its damage to the environment.

The Time Magazine article gives an example about Amsterdam’s “true-price initiative”:

The label by the zucchini said they cost a little more than normal: 6¢ extra per kilo for their carbon footprint, 5¢ for the toll the farming takes on the land, and 4¢ to fairly pay workers.

This example focuses on the costs of this initiative. But taking account of externalities can be done in a revenue-neutral way. For example, I would propose that we reduce many of our other taxes. In particular, I think sales taxes are stupid, and income taxes should be restructured. After all, we obviously want to encourage people to make money and to buy things. Both of those things significantly help our economy.

Taxing something tends to strongly suppress it. In fact, when you read the zucchini example, did you become concerned that people would tend to buy less food if it suddenly became more expensive? This could be compensated for by not charging sales taxes and lowering income taxes.

There are also taxes I would increase, such as inheritance taxes and property taxes. In particular, they should be restructured to make them more progressive. A progressive wealth tax would also be a good idea. And since volatility in the stock market is considered a very bad thing, I would add a transaction tax on securities. We could also add taxes on things that affect health, like we already do with cigarettes.

Bottom line: We should be taxing things that we want to discourage, and lowering taxes on things we want to encourage. I’m glad that cities are taking the lead on this, but I’d like it done at all levels of government.

I also want to point out that taking externalities into account actually strengthens capitalism. In fact, Adam Smith’s Wealth of Nations is about this kind of capitalism, and how it will benefit nations of people. Let’s use the “invisible hand” to make life better for everyone.

Share

10 Comments

  1. ebdoug wrote:

    How about the “tax” to pay health insurance for that employee in the grocery store. That should be factored in. Every time we pick up an item in the store, we pay for their health insurance. Those of us who pay our own (self employed) pay for our own plus theirs. Universal Health insurance would balance that a lot. Rich pay more, wal-mart workers don’t pay.

    Sunday, February 7, 2021 at 7:47 am | Permalink
  2. Iron Knee wrote:

    Having experienced a single-payer system in 3 different countries, I am all for it. Hopefully, we will be able to come up with a system that is actually “single payer”, unlike Medicare, which is a horrible mess.

    Getting health insurance through your job never made much sense, and has made less and less sense over time. If you want to link health care to corporations, how about a tax on companies based on their negative impact on people’s health, and designate the proceeds from that tax go entirely to help pay for healthcare!

    Sunday, February 7, 2021 at 8:40 am | Permalink
  3. J wrote:

    I’ve always been baffled by why businesses don’t aggressively lobby to be freed from the misplaced burden of providing health care for employees. Multinationals don’t do it in many other countries where they operate and business go to great lengths to avoid providing health care to individuals, like contractors or part time employees. Supporting lobbies for health care modernization has always seemed like a no-brainer for private comapanies to me.

    Monday, February 8, 2021 at 11:04 am | Permalink
  4. Jeff wrote:

    @J, I may be wrong, but I think it comes down to maintaining their workforce. If an employee’s only option is to get insurance through their employer, they may be willing to put up with lower pay, poorer conditions, and other negative aspects because they need the coverage.

    I’m sure businesses have run the numbers, and figured that insurance is a relatively small expense compared to what they would have to offer employees to work for them if healthcare coverage wasn’t on the table. I know that if I didn’t have to worry about insurance, I would be more likely to look for a job that pays better.

    Monday, February 8, 2021 at 1:43 pm | Permalink
  5. EemKam wrote:

    Jeff,

    It’s not just the hard costs. Employers have figured out that employees are less mobile, less willing to take the risk of leaving to find a new job or to start something on their own if they won’t have healthcare. Turnover is immensely expensive to businesses and providing healthcare helps control it. I believe that’s why businesses won’t support universal coverage.

    Tuesday, February 9, 2021 at 6:21 am | Permalink
  6. Dan wrote:

    Awww, the Laffer Curve, cut taxes=more taxes collected. According to my Econ Text books the only time it worked was when under JFK the highest bracket was cut from 90% to 70%, other then that the policy is a complete failure. We need more brackets and fewer exceptions. Income is income. Our healthcare system happened by accident during WWII when pay was frozen and businesses needed an edge to attract good workers.

    Tuesday, February 9, 2021 at 8:10 am | Permalink
  7. Iron Knee wrote:

    Jeff and Eemkam, I strongly disagree. The only reason companies don’t stop supplying health care to their workers is that they can’t do that until there is some other way for their employees to get health care (like single payer). Duh!

    How would a company compete for talent if they unilaterally stopped offering “free” health insurance? And offering health insurance does NOT reduce turnover. It just means that workers leave for other companies that offer health care. The only thing it stops is people leaving to create their own startups. Which means there are fewer startups. And startups create most of the new jobs in this country.

    Besides, why would a company want to keep someone who hates their job, and is only staying because they need the health insurance. That just gives them a bad worker!

    I can promise you that companies absolutely hate supplying health insurance to their employees. It not only costs money for the insurance, but each company has to hire a bunch of HR workers to manage the insurance. They can try to outsource managing the insurance, but then they have to instead hire a bunch of workers to manage the outsourcing. I know, I’ve been there (I’ve worked as a CEO).

    If offering health care was such a good idea for companies, then why is it that we are the only country where that is done? As Dan points out, it is a fluke left over from WWII, back when most people didn’t have health insurance.

    Tuesday, February 9, 2021 at 11:21 am | Permalink
  8. EemKam wrote:

    First of all, by no means am I suggesting that our current system is a good idea. I firmly support single-payer. While Medicare may be a mess, it’s much more effective per dollar spend without the overhead and profit required for commercial insurance.

    I’ve been there too, as the GM of the US division of a company making decisions about what benefits to offer our staff. Making us more attractive and sticky as an employer was absolutely part of the equation.

    That said, I don’t think we’re that far apart. First of all, I misspoke. I shouldn’t have said business will not support single-payer, but they are not advocating for it today, at least not en masse. My perception is that most business leaders accept the status quo. I’m not suggesting they like providing healthcare, but in the current system, they accept it and are incentivized to offer competitive benefits to attract and retain…

    Of course I’m not suggesting a company wants to keep bad workers. My point is good workers on the margin leave less because of the risk of not having healthcare and employers know it.

    Tuesday, February 9, 2021 at 7:38 pm | Permalink
  9. Iron Knee wrote:

    Our experiences were different, but it sounds like you were more in larger companies, while I was always doing startups and small-to-medium companies. That would likely explain the differences we saw. I would guess that having to hire a few HR people to manage healthcare would be less of a problem for a very large company.

    Wednesday, February 10, 2021 at 12:16 am | Permalink
  10. EemKam wrote:

    40 person office and my controller was my HR person…

    When I joined, turnover was through the roof so benefits was one of the things we adjusted to be a more attractive employer.

    Wednesday, February 10, 2021 at 10:02 am | Permalink

One Trackback/Pingback

  1. […] narrowly directed at identifiable individuals.   Iron Knee at Political Irony has discovered a new type of corporation formed in a growing number cities. B-Corporations have plus and minus incentives. […]

Post a Comment

Your email is never published nor shared.