When my economist husband tells me an modern article is both consistent with everything he learned about economics in college and in life, and has also taught him something new, I take notice. The article in question is Inflation Reaches Unicorns, by John Mauldin, and should be accessible at that link.

It truly is about economics: investments, venture capitalists, inflation, and yes, even unicorns ("large, well-known companies [which] are choosing to stay private long past the point where they would once have gone public"). It's a cogent and interesting analysis of how we got where we are and where we might be going.

However, what really made me perk up was some excerpts from a forthcoming book by Edward Chancellor, entitled, The Price of Time: The Real Story of Interest. Here Chancellor is actually quoting "Bastiat"—probably French economist Frédéric Bastiat—and it's not clear to me where one ends and the other begins. It's the thought that counts.

In the sphere of economics, a habit, an institution, or a law engenders not just one effect but a series of effects. Of these effects only the first is immediate; it is revealed simultaneously with its cause; it is seen. The others merely occur successively; they are not seen; we are lucky if we foresee them. The entire difference between a bad and a good Economist is apparent here. A bad one relies on the visible effect, while the good one takes account of both the effect one can see and of those one must foresee.

The bad economist, says Bastiat, pursues a small current benefit that is followed by a large disadvantage in the future, while the good economist pursues a large benefit in the future at the risk of suffering a small disadvantage in the near term. The American journalist Henry Hazlitt elaborated ... in his bestselling book Economics in One Lesson (1946). Like Bastiat, Hazlitt lamented the "… persistent tendency of men to see only the immediate effects of any given policy, or its effects on only a special group, and to neglect to inquire what the long-run effects of that policy will be not only on the special group but on all groups. It is the fallacy of overlooking secondary consequences."

As I read this, what struck me was its applicability to much more than economics. In particular, read the above paragraphs with an eye to the response of our leaders to the COVID-19 crisis, and you'll see a stunningly accurate description of "bad economics." A more obvious example can hardly be imagined of considering only the immediate effects of a policy, and its potential effects on only a special group, while not only neglecting, but actively suppressing, any thoughts about what might be the long-run effects of that policy on the community as a whole.

Posted by sursumcorda on Tuesday, June 28, 2022 at 5:25 am | Edit
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