The other major flaw with most regulation is understanding that people respond to incentives. They are typically written with a "assuming nothing else changes" mentality.
They raise taxes assuming people's spending habits or even citizenship won't change. They raise the cost of doing business assuming that businesses will just pay them instead of finding greener pastures.
You can look at nearly any "market failure" as popularly described in the media and find government interventions in the background. Enron and the re-regulation of California energy markets. Rising healthcare costs and government subsidies of 3rd party payments. Executive manipulation of earnings and caps on executive pay (at least the tax deductible parts). Just look at the tax code could probably come up with a million distortions of behavior - some "good" some "bad."
The world would be a much, much better place if government officials had to take, and pass, a basic economic competence test, if only to learn this one simple lesson. People respond to incentives.
No comments:
Post a Comment