Monday, March 16, 2015

Business Folk Think Only About the Short-Run; Fortunately, Politicians are Concerned About the Long Run, Right?

How about not even remotely close to being true.  Economist Robert Murphy explains why this liberal canard is nonsense in his recent Foundation for Economic Education article. Here's Murphy's opening:
We often hear that individual investors are myopic. They make decisions based on a relatively short time horizon, so forget about the long run. That’s why we need government officials to step in with regulations, as well as corrective taxes and subsidies, to guide the market toward long-term social goals.
Or so the story goes. Though this view of markets versus government is common, it has things exactly backwards: markets docontain sophisticated mechanisms for rewarding long-term planning, and democratic political institutions encourage extremely short-term thinking.
If you're prone to this fallacy, then definitely check out Murphy's article by clicking here.