Economic Fallacies Believed by Government Economists

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    Do not think about, write about or deal with  human behavior without determining the effects of incentives. It’s not their money, of course they’ll waste it.

   People believe in fads in predictable ways. The fads are followed without question but with a lot of social support. Academia currently supports government intervention without question, often in the face of contradictory evidence. This evidence is either ignored or explained away.

5 Myths Many Economists Believe
They fail public choice and basic price theory
Donald J. Boudreaux

Gary Bryant, in an e-mail, asks:

    What is [the] most ridiculous economic fallacy that is believed by a significant number of professional economists?

Wow. Good question. There are many such fallacies, and it’s difficult to rank-order them according to their ridiculousness. My list and rank-ordering, of course, reflects my own understanding of economics (which is Hayekian-Alchianian-Coasean-Buchananite-McCloskeyan) and my subjective assessment of ridiculousness.

But Mr. Bryant’s question is fun, so here’s a list of five:

(5) The idea that government-subsidized health care will lower the cost of health care.

<insert>

    Close examination of any activity related to government always reveals much higher costs.

(4) The notion that government must have monopoly control over the money supply in order to ensure sound performance of the economy.

<insert>

     Government control over money supply is supposed to control inflation. Never does.

(3) The belief that large differences among people in monetary incomes or monetary wealth reflect some "market failure" that ought to be "addressed" by the state.

<insert>

   This is always a puzzle since many government employees are in the top 10 percent.

(2) The blind faith that government officials in democratic societies can be trusted to exercise power over people who economists do not trust to make choices for themselves.

<insert>

    Government wrong policies go on forever. Personal wrong policies are self-limited.

(1-b) The notion that welfare payments (other than EITC) "subsidize" employers by pushing workers’ wages lower.

<insert>

   This is just bizarre. Paying people not to work only benefits non-workers and the government employees who get paid well to administer the nonsense.

(1-a) The notion that the minimum wage is, or can practically be, a boon to all low-skilled workers.

<insert>

   Interference in the market always produces inefficiency There are so many things wrong with a government-mandated minimum wage that it would require a book. The vast majority of people living on low wages only make minimum wages for a short period of their working lives.

Each of these notions reflects not only an ignorance of history but also an utter failure to grasp basic price theory.

<end>

     In government, you can be wrong forever so long as you’re on board with whatever myths are current.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Power Teaching: How to Find Someone to Teach Your Child when the Education System has Failed.
Cui Bono–Cherchez les Contingencies

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