WHY IGNORING ECONOMICS CARRIES A HIGH FUTURE COST

THE FIRST RULE OF ECONOMICS IS SIMPLE AND FUNDAMENTAL. RESOURCES ARE SCARCE. THIS MEANS THAT TIME, MONEY, LABOR, CAPITAL, RAW MATERIALS, AND EVEN HUMAN ATTENTION EXIST IN LIMITED QUANTITIES. IT IS NOT POSSIBLE TO SATISFY ALL NEEDS AT THE SAME TIME. CHOICES MUST ALWAYS BE MADE. EVERY CHOICE INVOLVES COSTS.

THE FIRST RULE OF POLITICS, ON THE OTHER HAND, IS OFTEN TO IGNORE THIS REALITY. POLITICAL SPEECHES FREQUENTLY START FROM THE ASSUMPTION THAT WILLPOWER, LAWS, OR DECREES ARE ENOUGH TO SOLVE COMPLEX PROBLEMS. FOR THOSE WHO DO NOT UNDERSTAND ECONOMICS, THIS PROMISE SOUNDS ATTRACTIVE. IN PRACTICE, IT GENERATES FRUSTRATION, DISORGANIZATION, AND FUTURE CRISES.

TO UNDERSTAND THIS DIFFERENCE, IT IS IMPORTANT TO START WITH THE CONCEPT OF SCARCITY. SCARCITY DOES NOT MEAN POVERTY. IT MEANS LIMITS. EVEN RICH COUNTRIES MUST CHOOSE WHERE TO ALLOCATE RESOURCES. IF MORE MONEY IS SPENT IN ONE AREA, LESS REMAINS FOR ANOTHER. THIS IS UNAVOIDABLE.

THE SAME LOGIC APPLIES TO GOVERNMENTS. WHEN POLITICIANS IGNORE SCARCITY, THEY PROMISE BENEFITS WITHOUT EXPLAINING WHERE THE RESOURCES WILL COME FROM. THE TYPICAL RESULT IS HIGHER DEBT, INFLATION, OR A HEAVIER TAX BURDEN.

A CLASSIC EXAMPLE IS PRICE CONTROLS. IN POLITICAL DISCOURSE, IT SEEMS ENOUGH TO DECLARE THAT A PRODUCT CANNOT COST MORE THAN A CERTAIN AMOUNT. FROM AN ECONOMIC PERSPECTIVE, THIS IGNORES PRODUCTION COSTS, LOGISTICS, AND RISK.

PRICE CONTROLS, POLITICAL DISCOURSE VERSUS ECONOMIC REALITY

POLITICAL VIEW	ECONOMIC REALITY	FINAL OUTCOME
LOW PRICE BY LAW	COSTS REMAIN HIGH	PRODUCERS STOP SUPPLYING
CONSUMER PROTECTION	SUPPLY SHRINKS	PRODUCT SHORTAGES
QUICK SOLUTION	MARKET DISTORTION	PARALLEL MARKETS

ANOTHER COMMON EXAMPLE IS THE IDEA THAT SIMPLY CREATING RIGHTS MAKES THEM EXIST IN PRACTICE. RIGHTS REQUIRE RESOURCES. SCHOOLS NEED TEACHERS. HOSPITALS NEED DOCTORS, EQUIPMENT, AND MAINTENANCE. IGNORING THIS DOES NOT MAKE SERVICES FREE. IT ONLY SHIFTS THE COST TO THE FUTURE.

THIS DISCONNECT BETWEEN ECONOMICS AND POLITICS HAS A DIRECT IMPACT ON A GENERATION THAT WAS NEVER TAUGHT HOW THE ECONOMIC SYSTEM WORKS. WITHOUT BASIC KNOWLEDGE OF SCARCITY, INCENTIVES, AND OPPORTUNITY COST, PEOPLE START TO BELIEVE THAT ALL DEMANDS CAN BE MET AT THE SAME TIME, WITHOUT CONSEQUENCES.

CONSEQUENCES OF IGNORING ECONOMIC PRINCIPLES OVER TIME

POLITICAL DECISION	IMMEDIATE EFFECT	FUTURE COST
UNLIMITED SPENDING	POPULARITY	DEBT AND INFLATION
UNREALISTIC PROMISES	ELECTORAL SUPPORT	SOCIAL FRUSTRATION
DISINCENTIVES TO PRODUCTION	ARTIFICIAL PRICES	SCARCITY AND UNEMPLOYMENT

A GENERATION THAT NEVER LEARNED ECONOMICS TENDS TO CONFUSE INTENTIONS WITH RESULTS. GOOD INTENTIONS DO NOT GUARANTEE GOOD OUTCOMES. IN ECONOMICS, INCENTIVES MATTER MORE THAN SPEECHES. WHEN POLICIES PUNISH THOSE WHO PRODUCE AND REWARD THOSE WHO DO NOT, PRODUCTION FALLS. WITH LESS PRODUCTION, THERE ARE FEWER JOBS, LOWER INCOME, AND LESS TAX REVENUE.

THE COST OF THIS IGNORANCE IS NOT IMMEDIATE. IT APPEARS OVER TIME. IN THE FORM OF DEVALUED CURRENCIES, LOW QUALITY PUBLIC SERVICES, HIGH INTEREST RATES, AND SOCIAL CONFLICTS. YOUNG PEOPLE WHO BELIEVED IN SIMPLE SOLUTIONS EVENTUALLY FACE A FUTURE WITH FEWER OPPORTUNITIES.

IN CONCLUSION, THE FIRST RULE OF ECONOMICS, SCARCITY, CANNOT BE ERASED BY POLITICAL RHETORIC. IGNORING IT DOES NOT ELIMINATE THE PROBLEM. IT ONLY DELAYS IT AND MAGNIFIES ITS EFFECTS. A SOCIETY THAT FAILS TO TEACH ECONOMICS TO NEW GENERATIONS IS NOT BEING GENEROUS. IT IS SIMPLY PASSING THE BILL TO THE FUTURE, WITH HIGH INTEREST AND CONSEQUENCES THAT ARE DIFFICULT TO REVERSE.