Economics and a Mamdani model, Big Apple style, Pg8

Key Highlights:

• Zohran Mamdani will become the new Mayor of New York City (NYC) in January 2026, marking a shift towards welfarism.
• Mamdani's key promises include free buses, rent freezes, and universal childcare.
• The article questions the sustainability of welfarism in market-based economies.
• It suggests balancing welfare with economic incentives to avoid inefficiencies.

Detailed Insights:

• Welfare policies offer quick, visible outcomes but can suffer from eroding quality, deadweight losses, and black markets.
• Conventional economics acknowledges that policies aiding the worst-off can increase social welfare, even with some inefficiency.
• Economic history suggests a "double movement" between market overreach and social protection, requiring a balance between efficiency and inclusion.
• A useful model involves building a "thermostat" between Rawlsian (social protection) and Pareto (efficiency) approaches, leaning towards social protection during stress and efficiency as capacity grows.
• Successful welfarism requires fiscal honesty, careful micro-economic design, subsidizing outcomes, using means-tested vouchers, and funding quality.
• Mission-driven firms and socially minded entrepreneurs can bridge the gap between state and markets by accepting capped fares for long-term contracts and investing in staff development.
• Sustainable welfarism requires transparent costing, growth measures, productivity compacts, regulatory simplification, and public investment.
• Economic history teaches sequencing: lean Rawlsian during shocks and downturns, and lean Pareto as capacity catches up.

Key Concepts Involved:

• Welfarism: A system where the state plays a key role in the protection and promotion of the economic and social well-being of its citizens.
• Pareto efficiency: A state of allocation of resources from which it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.
• Rawlsian justice: A concept of fairness, where society should be judged by how it treats its least advantaged members.