Economics and Policy 101

You should never, ever, make a policy change, unless you can say why the policy was enacted in the first place. You should never, ever, make a policy change unless you are able to make the argument for not changing it.

This is a constant problem. People want "reform" (the most debased word in the political lexicon, since most reforms aren't) but they never seem to understand the costs of change.

When you reduce capital gains taxes you push money into the secondary securities markets and reduce consumption demand. You make the rich richer, and people who work for a living comparatively poorer.

When you get rid of estate taxes you will increase the amount of money that living people have to pay in taxes and help create a class of rich people who never earned their own money.

When you reduce the progessivity of the taxation system overall you reduce growth in demand for general goods and services and increase the demand for financial products and luxury goods.

When you reduce funding for public health you increase the spread of STDs and you create a pool of people who will act as carriers for infectous diseases, thus making even rich people more likely to suffer from and die from disease.

Before you make changes, always ask yourself "why was the old system created? What problems was it meant to solve?"

Tags: economics, policy