Is Wage Insurance What I've Been Looking For?

Greg brings up the new wage insurance proposal that I have been meaning to blog about.

He's skeptical. I'm interested.

In part my reasons are political economy. I am looking for a mechanism that will prompt all Americans to buy into to globalization and technological change. I understand that globalization per se is overly blamed for job losses but I think that's the term the populace uses for "things beyond our control."

I want to assuage their fears and let them know that the things beyond their control are evolving in a way that on average will benefit them more than it will hurt them.

Secondly, I am concerned about the welfare implications of policies which pass our basic cost-benefit test. If I am forced to choose between assuming that the marginal utility of income is constant across the population or that everyone has the same utility function with respect to aggregate consumption, I won't hesitate to choose the later.

For non-nerds I mean that if I either have to assume that $1000 means just as much to Bill Gates as it does to Bill the Plumber or to assume that Bill Gates would value $1000 the same as Bill the Plumber, if he had Bill the Plumbers income then I am going to go with the second one.

This means that I have to worry about who gets what benefit. I believe there was a time when Milton Friedman's comment that we are generalized in consumption and therefore will all benefit from lower prices was enough. However, I think that the new economy is systematically biased in favor of talented people in ways that cannot be ignored.