Government distorts prices, increasing them or decreasing them as the case may be, and thus reduces economic efficiency, creating gluts and scarcity. Take a simple thing like the capital gains tax. It discourages the reallocation of assets, and therefore decreases efficiency in investing. The death tax, by making it likely that one's assets will be double or triple taxed, and will not go intact to those one chooses, discourages savings and favors consumption. Various educational subsidies have increased enrollment in colleges but hardly affected graduation rates, suggesting a glut of ill-prepared students. AFDC, when it was introduced, arguably had the perverse effect of increasing illegitimacy rates and rates of family dissolution.
Thus, it is incumbent upon government not to interfere with the economy too much, and to use the least distorting means of achieving a goal. That is why I do not want ambitious programs, but a rebate....... |
