Now I understand why Krugman feels driven to use examples like alien invasions; it’s the only way to shake everyone and say, “This is my point!!!”
And with that, I offer you my lastest salvo in the ObamaCare work incentive debate:
There is a feeling that giving low-income workers means-tested subsidies is harmful because the resulting drop in labor output is “involuntary” or a “mandate.”
But no, that’s not what those words mean. In standard economic analysis, the government is only giving more options to someone when it says, “We will give you this bonus money under such-and-such conditions.” After all, the worst-case scenario is for the possible recipient to reject the offer. For an extreme example, if the government says to people, “We will give you $50,000 a year if you punch yourself in the face every morning,” that actually provides more utility to the people who choose to collect the money; if it didn’t, they would simply refuse to punch themselves in the face, and would be right where they were in the absence of the offer.