Private-property protections promote in property holders a long-run perspective.
Suppose that every human being was today to learn, and to accept this knowledge beyond any doubt, that the world will end in one year, on October 5th, 2018. What would ‘ideal’ government policy look like in such a doomed world? I’m not sure just what the details of this policy would be. I’m quite confident, however, that particular outcomes would become much more relevant as guides to ‘ideal’ policy while rules and processes would become much less relevant.
With the world ending in one year, government-orchestrated forced wealth redistribution would become more attractive even to many who today oppose such redistribution. If humanity is not long for this world, the costs of forcibly transferring resources from “the rich” to “the poor” would be much lower because we’d no longer have to deal with most of the bad economic incentives unleashed by such redistribution.
Sure, such redistribution dampens incentives to invest, work, and take risks. But in a doomed world, it’s understandable to rhetorically ask: “So what? Who cares if fewer, or even no, long-run investments take place?”
Also in a doomed world, state-enforced protection of existing particular businesses and jobs makes more sense than it does in our real world. Because changes in the pattern of consumer expenditures might well cause the short-run rate of unemployment to rise, tariffs and other government restrictions on changes in the pattern of consumer expenditures might be justified in a world nearing its end. Such restrictions, in our real world, are unjustified in part because, by cementing in place the status quo, these restrictions prevent economic growth over time – economic growth that is impossible without the creative destruction of the status quo and whose full value isn’t reaped until well into the future.
Even price controls on certain goods and services might be economically justified in a doomed world. For example, in industries in which the elasticity of demand for labor is very low in the short-run, minimum wages in those industries might be justified. That is, in industries that take more than a year to fully adjust their operations to higher labor costs, an imposed minimum wage might make more economic sense in a doomed world than in the real world.
Furthermore, in such a doomed world the harm unleashed by government violations of constitutional rules would be much less. In our real world, much (most?) of the benefit of holding government bound to obey constitutional rules is that this adherence to constitutionalism not only makes government policy more predictable over time (and, thus, encourages individuals to make longer-run plans), it also reinforces the importance of the rule of law. But in a doomed world, long-run plans have no value to anyone and much of the value of the rule of law perishes.
Many of the most valuable institutions of any thriving society are those that encourage individuals in that society to act as if they care about the future. Private-property protections promote in property holders a long-run perspective. The rule of law is valued not just for the protections it offers today, but for the protections it offers over time and for the predictably that it offers about the future behavior of government officials. Entrepreneur-driven economic change is valued not only, or even mainly, for the improvements that it makes to our standard of living today, but for the stream of improvements that such change offers over time.
In short, if we all came to believe that our world would end in one year’s time, many of the government policies preferred by “Progressives” and other interventionists would suddenly become more economically, and perhaps even more ethically, acceptable, for the downsides of these policies would never materialize (the future being no longer relevant).
Put differently: trade restrictions, income or wealth ‘redistribution,’ and many other policies that are today endorsed by “Progressives” and other interventionists are policies that treat today, the immediate present, as the only relevant time period.
Reprinted from Cafe Hayek.
Donald Boudreaux is a senior fellow with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University, a Mercatus Center Board Member, a professor of economics and former economics-department chair at George Mason University, and a former FEE president.