Most often the state compels you to do things, not because these things are supposed to be good for you, but because they fulfill the state’s purposes. The state doesn’t take your money to help you. Sometimes, though, the state does pass laws that claim to restrict people for their own good, e.g., laws that forbid use of certain drugs that are supposed to be bad for your health. Laws of this kind are called paternalistic.
In a dynamic economy, an action not only triggers just one effect, but always an entire series of different consequences. While the cause of the first effect is easily recognizable, the other effects often occur only later and no such recognition occurs. Frédéric Bastiat described this phenomenon in 1850 in his ground-breaking essay “What Is Seen and What is Not Seen”:
[This article is adapted from a July 17 Mises Weekends interview, available here in Mp3 format.]
Jeff Deist: You have studied at length, conceptually, central banks around the world. Before we get into that further, I’d like to ask you as a German especially, what your opinion is of the ongoing crisis in Greece.
Karl-Friedrich Israel: One of the leading German economists has recently compared the Greece situation to the so-called Dutch disease.
Too much of the commentary about the Greek crisis has focused on whether or not Greece should drop the euro and not enough on the structural problems arising out of decades of socialism. Meanwhile, the Greek government has borrowed more money than the Greek people can possibly repay, and debased money will not make this fact disappear. On the contrary, more easy money will cause even more harm.
There have been almost uncountable times politicians have promoted “comprehensive” political reforms in areas ranging from immigration to health care to taxation and entitlements. However, there are good reasons to be apprehensive whenever politicians talk about comprehensive reforms.
Comprehensive politics.
Consider how “comprehensive” rhetoric is utilized politically.
Greece is a hot topic at the moment, mostly with the continued negotiations over bailouts from the European Union and, through institutions like the IMF, the world at large. Much of the discussion paints the image that Greece is only a debt-restructuring away from a stable economic situation. However, without understanding how Greece got into this problem in the first place and identifying the root cause of an over-indebted society, any plan or solution has a high probability of failure.
Hillary Clinton’s latest campaign salvo attacked “quarterly capitalism,” the supposedly irresponsible corporate focus on short-term results at the expense of long-term growth. She promised government fixes.
Is there too much short-termism in business firms? To answer this, let’s look at participants’ incentives.
Presidential hopeful Bernie Sanders recently raised the ire of both progressives and libertarians with his remarks concerning immigration:
“Open borders? No, that’s a Koch brothers proposal,” Sanders said. “That’s a right-wing proposal, which says essentially there is no United States.”
