Failures in the economy

Henry Hazlit known author of popular works on economics, wrote a book
titled "Economics in one lesson" (Henry Hazlitt, Economics in One
Lesson, New Rochelle: Arlington House, 1979). This single lesson
lies in the fact that, in analyzing any economic project, "should be
tracking not only instantaneous, but its results and long-term, not
only primary but also secondary to the consequences, the impact was not
only on individual groups, but also on society as a whole. "
Hazlit believed that the inability to use, in practice, this lesson is
most common cause of economic failures. Since it is difficult to
argue. Endless stream of proposals to help individual industries, regions
or groups of the population without regard to how it will affect all of society
a whole. Politicians all over again draw attention to short-term
benefits offered by their actions, not thinking about long-term consequences. And
naturally, they exaggerate the benefits, said nothing about the
costs. When a momentary advantage and lie on the surface, and the costs
less visible and mostly implemented in the future - an organized
groups pursuing their own interests, it is easy to get people
believe in a false economic justification for their projects. It is easy to
examples of how the secondary effects are not taken into account. Consider
For example, state control over rents. Advocates of this
measures argue that control, preventing the increase in rents,
making housing more affordable for the poor. It's true, but at the same time
can not be avoided and secondary effects. The lower rate of rent
board will reduce the rate of return for investment in housing construction.
Owners of existing housing will probably have to settle for a more
lower income from the rental of his lease, but a lot of potential owners,
thought, would send their money in some other sphere of the economy;
Investment in residential construction will decline, and housing will eventually become
even less accessible. There will be a deficit, and over time will decrease and
quality checked zhilya.Odnako secondary effects will be noticed immediately. Therefore, control of
rents are still very popular on the New York City
U.S. East Coast to the West Berkeley, in spite of the fact that
the inevitable results of this monitoring are low level
housing supply and poor quality of its content. According to the Swedish
economist Assar Lindbeck, "in many cases, rent control
board is the most effective of all known to mankind
the means of destruction of cities, except maybe the bombing. "
Proponents of import tariffs and quotas for the sake of "job protection" is also not
want to see the secondary effects of their policies. Consider
For example, the impact of trade restrictions that reduce the sentence
foreign cars in the U.S. market. As a result,
expanding employment in the domestic automotive industry.
Let us, however, to secondary effects in other areas. Limitations
mean higher prices for cars. As a result, those who have their
now gets forced to reduce purchases of food, clothing
and other goods. This reduction in spending means less production and
decline in employment in their respective industries.
Furthermore, a secondary effect also applies to foreigners. Selling
Americans to smaller cars, they get fewer dollars, which
could buy goods made in America. Consequently, the restrictions
on the import of cars led to a drop in U.S. exports.
Protectionist measures will not create jobs, but only redistribute
them, but, unfortunately, did not immediately evident. So
it is not surprising that many people consider a policy of "protecting jobs"
quite reasonable, despite its inaccuracy.
Let us consider another misconception resulting from failure to take into
attention to secondary effects. Politicians often claim that
government spending on priority programs to increase employment.
Of course, there may be reasonable for the state
activities for the construction of roads, expansion of the police service,
improve the judicial system, etc. Creation of new jobs, but not
included in this series.
In fact, suppose that the government spends $ 2 billion, employing
working to build a high-speed railway line linking
Windsor to Montreal. How many jobs will this project? If
take into account the secondary effects, the answer is: none. For
funding for this project, the government can use either taxes
or the national debt. Taxes of $ 2 billion cut as
consumer spending and private savings, thus eliminating
exactly as many jobs as they create a government spending.
If the project is financed by debt, it will
to higher interest rates and a reduction in private investment and
consumer spending for the same amount of 2 billion dollars the same way as in
the case of restrictions on trade, the result will be redistributed
jobs, not creating them. Does it follow that the
project will not have to? Not at all. But its rationale should be based on
of the benefits that will bring high-speed rail line, and
not the illusory hopes to expand employment.