Re: Palestinian Economic Proposal

[Sven R Larson <larson@xxxxxx>]

The Mosler plan for Palestine is an intriguing idea that I heard of for
the first time at last year's PK conference in Knoxville. It is a bold
attempt to bring economic theory out in the streets, something we
economists are not always very good at (our offices are perhaps too
comfortable...). Therefore I think this plan deserves serious attention;
my contribution is, to start with, a bit of criticism.

Let me focus on a critical part of the plan, described under the
"Enforcement" headline. Quote:
"The driving force behind the Mosler Plan is the requirement that
residence owners submit PARs to the PA. This requirement is only as good
as the enforcement process. If the PARs are not paid, the PA must have
the right to sell the property and thereby attempt to collect the
delinquent payments. The PA need not even know who the owner is."

In a monetary tax payment system, if someone fails to pay taxes they can
be forced by court order (or debt collection or similar structure) to
give up part of their money income in the future. The PAR system
excludes that possibility by definition. Wouldn't it instead be a good
idea to look at how, e.g., the Baltic countries established their own
currencies, or how the Checz Republic and Slovakia separated? Even the
secession of Iceland from Denmark or the emergence of Slovenia might
suggest alternative strategies.

Quote:
"This may seem harsh, but in practice the requirement is rather modest.
Remember, public service work is always available, and any property
owner need only work four hours per week for the PA to receive the
needed PARs.  Anyone unwilling to do at least that much for his
community should receive little sympathy."

This isn't working. Try come as an American to the Palestine people and
tell them this - it's not going to work. In many countries across the
Islamic world work-free income is an accomplishment worth admiring; some
people in the Palestine territories come from these cultures and regard
the ability to liberate one self from the hardships of everyday work as
a true strength. This doesn't count for all Palestinians, as their
backgrounds are very different, but the share who have this cultural
heritage may very well be large enough to bring your plan into real
trouble.

I could also add all my critique of the ELR idea, which I have presented
on this list before. Very briefly: a state that is ready to force people
to work (at gunpoint or at cashpoint) is a system where recessions bring
intolerance out as a social poison. It is also a system where
productivity, creativity and ingenuity are restrained, sometimes
severely, as countless examples from the 20th century can tell. You do
need to explain in more detail - much more detail - how your plan is
going to avoid all those social and economic distortions.

Quote:
"It is also expected that the PA would establish a policy for
exceptions. For example, there could be exemptions for poor people that
are disabled, aged, or suffering some other hardship."

You are going to implement this in one of the world's most fragile
societies. Your system is designed so that it can unite people around a
common cause and thereby help creating stable, durable social
institutions. But it is also designed in a way that may aggravate fight
over scarce resources - in this case, the individual's time - in a very
poor society, and do so with a list of exceptions that isn't more
specified than this. You need to get back to the drawing table and
address these tricky, unquantifiable issues that aren't found in
textbooks, statistical databases, economic models or anywhere else
except out in the streets of the society you're focusing on.

I do like the initiative and wish for this plan to bring positive
development to Palestine. Therefore, I really hope all the problems can
be straightened out so the plan doesn't fail before it has had a chance
to prove what it's worth.


May Keynes be with you,


/srl

--
Sven R Larson
PhD; Assistant professor of economics
Department of Social Sciences, Bldg. 22.2
Roskilde University
Pb 260
DK-4000 Roskilde, Denmark
Phone: (+45) 4674 2910