Incentives Work-Even When It's Discomforting To Politicians

The Swedish government reduce the subsidies to the still voluntary unemployment insurance (although it plans to make it compulsory later)-both in the form of higher fees and lower benefits. The results? Not, unexpectedly for anyone who understands economics, an increasing numbers of Swedes have decided to stay out.

Interestingly though, the Swedish government is surprised as it budgeted for more than 1 billion kronor more in fee revenues than what they know appear to actually receive.

The fact that they didn't appear to expect that higher prices and less benefits from the unemployment insurance would lead to lower demand is just another reason why I'm now starting to think I shouldn't have credited Finance Minister Anders Borg with being a competent economist. Apparently, he and the other at his department seems increasingly incompetent.

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