Politics vs. Economics

By:  Thomas Sowell
09/27/2011
       
Politics vs. Economics

They say "all politics is local." But economic decisions impact the whole economy and reverberate internationally. That is why politicians' meddling with the economy creates so many disasters.

The time horizon of politics seldom reaches beyond the next election. But, in economics, when an oil company invests in oil explorations today, the oil they eventually find and process may not make its way to market and earn a profit until it is sold as gasoline a decade from now.

In short, the focus of politicians is extremely limited in both space and time — and all the repercussions that lie beyond those limits carry little, if any, weight in political decisions.

At one time, many state banking laws forbad a bank from having multiple branches. The goal was limited and local — namely, to prevent big, nationally known banks from setting up branches that many locally owned banks could not successfully compete against.

They say "all politics is local." But economic decisions impact the whole economy and reverberate internationally. That is why politicians' meddling with the economy creates so many disasters.

The time horizon of politics seldom reaches beyond the next election. But, in economics, when an oil company invests in oil explorations today, the oil they eventually find and process may not make its way to market and earn a profit until it is sold as gasoline a decade from now.

In short, the focus of politicians is extremely limited in both space and time — and all the repercussions that lie beyond those limits carry little, if any, weight in political decisions.

At one time, many state banking laws forbad a bank from having multiple branches. The goal was limited and local — namely, to prevent big, nationally known banks from setting up branches that many locally owned banks could not successfully compete against.

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Thomas Sowell (photo)

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