John T. Harvey — No Poor Need Apply: Four Reasons Why President Trump Is Wrong

Wednesday, President Trump uttered the following now widely-publicized statement regarding the top economic positions in his administration:

“And I love all people, rich or poor, but in those particular positions, I just don’t want a poor person. Does that makes sense? Does that make sense?”

While this has provided wonderful material for critics and satirists, are they really being fair? On the surface of it, there’s a certain logic to his statement. Shouldn’t those who have been the most successful in the economy also be the ones to offer advice?

Unfortunately, no. Here are four reasons why putting rich folks in charge is in no way a guarantee of superior economic performance:

Forbes — Pragmatic Economics
No Poor Need Apply: Four Reasons Why President Trump Is Wrong

John T. Harvey | Professor of Economics, Texas Christian University

Ajay Shah — Become a public policy thinker in three easy steps

Step 1: What's the market failure?

When should the State intervene? The technically sound answer is: When you are certain there is a market failure, and when you are confident you know how to setup the correct State capacity for the intervention.

Market failures come in four kinds: 1. Asymmetric information, 2.externalities, 3. market power and 4. public goods. These are technical terms in microeconomics and each needs to be carefully understood.

The first hurdle that must be crossed in policy thinking is: "Is there a market failure?" Every proposal to do something in public policy faces this test.

Step 2: What's the proposed intervention?

Once we agree there is a market failure, we have to figure out what we'd like to do about it. Here, it's important to understand the anatomy of the market failure, and solve it at its root cause.

If there is a causal chain x -> y -> z, and there is a problem with the outcome z, don't use the power of the State to change y or z. Understand the root cause, and solve it there.…

Step 3: The hurdle of public administration

Okay, you are all dressed up and ready to go, with a demonstrated market failure, and a minimal intervention which solves it. Now the question arises: Can you design a feasible solution with real world public administration?

Ajay Shah
Become a public policy thinker in three easy steps

Ajay Shah | Co-Lead of the NIPFP-DEA Research Program, India