Let's see what Bastiat had to say about that, Zoombie, from
here.
There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
And there's where the problem begins. As I described in the OP, all the "unintended" consequences of the Cash for Clunkers program were easily foreseen, because basic economics made them easy to foresee. But when those who foresaw them pointed them out, they were ignored. Why? Let's ask Robert K. Merton.
Merton labeled the third source the “imperious immediacy of interest.” By that he was referring to instances in which someone wants the intended consequence of an action so much that he purposefully chooses to ignore any unintended effects.
Politicians garner their support by "doing something" and thereby claiming credit for solving some social problem. By willfully sweeping the "unintended" consequences of that action under the rug, they can get credit for what they "fixed" in this cycle, and set up future problems that will, surprise, surprise, need the future intervention of those same politicians to fix. All this was described for C4C in the OP.
Let's walk through a simple example.
If I buy a banana, I give up some cash, the banana seller gets some cash, I get a banana -- and no distortion is introduced into the economy. So unintended consequences are low.
But if government takes money from some people and gives it to other people so that they can buy bananas, a whole raft of market distortions take place, and those each have their own unintended consequence.
The government has to get its money from somewhere. So it either borrows it, making a debt the citizens have to pay for later, or it prints it, which makes each dollar the citizens already hold worth less, and causes inflation, or it taxes it, which means that people who perhaps had planned to buy a tomato can no longer do so, because that money has left their budget.
Each of those methods causes unintended consequences. For brevity, let's just look at the last one. Because more bananas are sold, the banana growers think the market is larger than it really is, so they plant more banana trees and hire more banana pickers. When the artifically-fueled demand disappears next season, bananas rot on the trees and banana pickers get laid off.
Meanwhile, tomato growers lose business, see a declining market, and plant less and hire less next season.
Never fear, though. Next season, when there's a glut of bananas on the market, and tomato prices go through the roof from reduced supply, the politicians will come swooping in with price supports for the banana industry and price controls on the tomato crop. Those actions will cause further distortions that will have to be dealt with at a later date.
And those new solutions to problems that wouldn't have existed save for distortions introduced last cycle give politicians more power than they had before this whole cycle began.
And THAT is what I mean when I speak of "unintended consequences."
The game of politics cannot create wealth, it can only move it around. Politics, therefore, is a zero-sum game. For every winner, there's a loser. That's the one dirty secret that politicians don't want people to realize, and it's the single most important reason for the obfuscation of "Keynesian economics."
