Naked Economics: Undressing the Dismal Science pdfdrive com

How many people will be sleeping under Wacker Drive? This is the pie-slicing
question. In 2000, I was assigned by The Economist to write a story on poverty
in America. With the economy still booming, I sought some way to express the
striking dichotomy between America’s rich and poor. I found it right outside the
front door of my office building:
A stroll down Wacker Drive, in Chicago, offers an instant snapshot
of America’s surging economy. Young professionals stride along,
barking orders into mobile phones. Shoppers stream towards the smart
shops on Michigan Avenue. Construction cranes tower over a massive
new luxury condominium building going up on the horizon. All is bustle,
glitter and boom.
But there is a less glamorous side to Wacker Drive, literally below the
surface. Lower Wacker is the subterranean service road that runs directly
beneath its sophisticated sister, allowing delivery trucks to make their way

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through the bowels of the city. It is also a favourite refuge for the city’s
homeless, many of whom sleep in cardboard encampments between the
cement props. They are out of sight of all that gleams above, and largely
out of mind. As Wacker Drive, so America.
1
What are we willing to promise the most disadvantaged? The market
economies of the developed world lie along a continuum, with America at one
end and the relatively paternalistic European economies, such as France and
Sweden, at the other. Europe offers the kinder, gentler version of a market
economy—at some cost. In general, the European nations are more protective of
workers and have a more substantial safety net. Generous benefits are mandated
by law; health care is a birthright. This leads to a more compassionate society in
many ways. European poverty rates, particularly for children, are far lower than
those in the United States. Income inequality is lower, too.
It also leads to higher unemployment and a slower rate of innovation and job
creation. Workers, bundled with lots of mandatory benefits, are expensive. Since
employees cannot be fired easily, firms are slow to hire them in the first place.
Meanwhile, generous unemployment and welfare benefits make workers slower
to take jobs that might be offered. The result is what economists refer to as a
“sclerotic” labor market. During normal economic times, European
unemployment rates tend to be significantly higher than the American rate,