All those who agree with setting up or subsidizing of things they consider to be right, don’t usually realize that they are spending resources that must, of course, be missing elsewhere.
In the last article, the meaning of money and prices was explained (Money and prices as information carriers). The basic idea of that post was about this: if there is not enough of some product (whether due to limited quantity or due to an increased interest in it), its value grows up and that motivates people to produce and sell this product (because they can earn a lot). But when there is more than enough of some product (whether due to large quantity or due to decreased interest in it), its value is decreasing and that leads to lower profits or even a collapse of companies which are selling this product; the price affects not only the producers but also the consumer, so if something is rare and expensive, people don’t waste it and they are also producing more of it. In the opposite case, people use it more and they produce it less, which is exactly the desired condition which can be achieved when everyone minds his own business and nobody manipulates with this system. But as I promised last time, we will now talk about what happens when someone intervenes.
The prices can be deformed in many ways. The most common ways which increase prices are, for example, the taxation of the goods themselves and the people who produce them (the problem arises especially when different things are taxed differently); increasing the supply of money – inflation (in practice, it is never done in a uniform way); the administrative burden on producers (again, it is not the same for all and it is reflected in the price); the setting of variety of regulations and standards (safety, hygiene and other – in principle, such regulations have the same impact as administrative burdens) and so on. On the contrary, the most popular way to decrease prices are presumably subsidies, which are expensively paid by taxpayers, artificial interest rate cuts (all by state convenient loans, for students, newlyweds and so on), investment incentives. There are many ways to manipulate prices, some go against each other, not all countries use each of them, but in the real world, practically no other institution can largely influence prices against the wishes of producers and consumers.
I suppose most readers just think about why the price manipulation would have to be inherently bad; if the price of something useful is reduced, it can be beneficial, so the state can help people in this way. However, the problem lies in the fact that resources are always limited (otherwise, there would be no need for prices and also no need for the state), ergo every artificial change of price to make some products more affordable, logically causes the opposite effect on other products. And who can judge whether (and how much) the cultural or natural heritage is more important (or less important) than for example treatment which can reduce the pain of people or even save lives? How ridiculous is the idea that there is someone who would be able (and react through time to changes in reality) to decide this for every product or service when there are so many of them that we are not able to name them all? Through pricing, these decisions make everyone who is involved; and the more someone is interested or successful in any field, the stronger his “voice” is in the decision-making process. Can you really imagine for a second that an institution could fundamentally modify or even manage the mechanism?
Unfortunately, every time there is any regulation, taxation, subsidy, or any other state intervention, it is happening exactly what I described above. The one who proposes such a move (and let’s suppose it is in a good faith) is either foolishly believing that he can decide what is right better than all those who are involved and caring about that stuff, or (and that is, unfortunately, more frequent) he can’t see the consequences of his actions. Just as all those who agree with setting up or subsidizing of things they consider to be right, don’t usually realize that they are spending resources that must, of course, be missing elsewhere. A diametrically different situation, of course, is when someone voluntarily donates from his own money, deciding only about himself and his priorities; unlike politicians who usurp the right to make decisions for us, as if they were able to make better decisions about our interests than we ourselves.
Česky: https://www.mises.cz/clanky/statni-zasahy-jako-nicitele-informaci-1398.aspx
Author: Urza
Who is him?
