segunda-feira, 7 de abril de 2014

Basic Economics


Both social and economic policies are often discussed in terms of the goals they proclaim, rather than the incentives they create. For many, this may be due simply to shortsightedness. For professional politicians, however, the fact that their time horizon is often bounded by the next election means that any goal that is widely accepted can gain them votes, while the long-run consequences come too late to be politically relevant, and the lapse of time can make the connection between cause and effect too difficult to prove without complicated analysis that most voters cannot or will not engage in. (p. 365)

Where there are elected governments, its officials must be concerned about being re-elected - which is to say that mistakes cannot be admitted and reversed as readily as they must be by a private business operating in a competitive market, in order for the business to survive financially. No one likes to admit being mistaken but, under the incentives and constraints of profit and loss, there is often no choice but to reverse course before financial losses threaten bankruptcy. In politics, however, the costs of being wrong are often paid by the taxpayers, while the costs of admitting mistakes are paid by elected officials. (p. 492-493)

The tendency of those who run an organization - whether profit-seking or non-profit, military, religious, educational or other - is to use the resources of the organization to benefit themselves in one way or another, even at the expense of the ostensible goals of the organization. How far this tendency can go can be limited by powerful outside interests on which the organization depends for its existence, such as investors who will either get a satisfactory return on their investment or take their money elsewhere and costumers will either get a product or service that they want at a price they are willing to pay or likewise take their money elsewhere. These outside interests are not as decisive in the case of non-profit organizations. (p. 581)

The market is as moral or immoral as the people in it. So is the government. The fact that we call one set of people "the market" when they engage in transactions among themselves and another set of people "society" when they exercise political power over others does not mean that the moral or other imperfections of the first set of people automatically justify having the second set of imperfect people over-ruling their decisions. (p. 594)

- Thomas Sowell, "Basic Economics, a Common Sense Guide to The Economy, 4th edition", 2010.

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