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When Governments Ignore Economics
Men are not robots. If you change the environment in which they operate, they do not continue on down a pre-programmed path. They change what they do, they act towards specific ends, and their actions are based on what they believe will accomplish those ends. This is the essence of economics which is lost on politicians and liberals.
Whenever someone suggests a new government regulation or increased tax, they don’t take into account that people are not robots. They believe they can just increase taxes on the rich and sit back and collect the extra revenue. If people were robots this would work just fine, but they are not. By changing the economic environment, that changes people’s incentives. With the reward of entrepreneurial success diminished, fewer people will accept the risk that comes with starting or expanding their business. With the reward of high income reduced, fewer people will undergo the time, cost and work necessary to become a professional, such as a doctor. The results are higher unemployment, lower economic growth, fewer doctors and other professionals, and a lower standard of living for everyone.
These and other negative consequences never come into the calculations of the statists who recommend even more progressive taxation. This comes from a fundamental lack of economic knowledge. The laws of economics are as immutable as the laws of physics. Yet while no one considers building a spaceship without accounting for the law of gravity, people think they can ignore the laws of economics when making policy. Ignoring economics is the fatal conceit that dooms the policies of the left to fail.