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Sunday, November 30, 2008

As Barak Obama approaches presidency, there are many issues that he will face, and much "change" has been promised. The issue that has been most discussed recently is the economy. Something must be done. Michael Boskin, a professor of economics at Stanford University offored Obama some advice in an article from the New York Times and stated:

"His administration should also be suspicious of trying to pick economic winners and losers with subsidies, taxes and regulation. It doesn’t work. Ask the Japanese, the Koreans or the Europeans. Instead, the government should set general goals for the environment, energy and health care — and then let entrepreneurs, investors, venture capitalists and consumers decide how best to achieve them. No policy that cannot be commercially sustainable in the long run makes sense.
Any tax increases should be delayed until the economy has recovered. Raising tax rates is rarely a good idea, but it is especially foolish in a deep recession. On the budget and spending, he should try pilot programs to test his ideas. If they work at sensible cost, he will get broad support to expand them. If not, he should jettison or reform them."

I agree with his analysis that it is not a good plan to pick winners and losers, and then tax or subsidize them according to congressional incentives, but rather, it would be better to provide goals in the concerned fields and then provide incentives for entrapaneurs to reach them. This will prove to yield less government induced market failure, and more competition in the fields concerned.

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