Thursday, March 05, 2009

Three Sentence Challenge, Encyclical Edition : UPDATE

Let us say the Holy Father is working on his new encyclical and needs assistance in his economic thought.
He will take three sentences from anyone.
What would you write?

I had made the challenge, but I had not given my own three sentences.
  1. Incentives matter
  2. Institutions (rules of the game) matter
  3. Price controls do not only have short term effects but long term effects.
I think if Frederick Bastiat were alive, he would advise the Holy Father with words from one of his famous essays.
In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
I wish I had challenged five sentences so that Bastiat could add the next paragraphs:

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.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.


Steve.master1 said...

What would you write? I'll think about it.

Kevin said...

1. Markets fail use markets. Public choice, epistemological humility, and experience should make us wary of government being able to solve the problem, and not make it worse.

2. Capitalism was not founded on anything or built by anyone. Institutions emerged that promoted cooperation under the division of labor.


Matthew Ch. 13

He replied, 'No, if you pull up the weeds you might uproot the wheat along with them. Let them grow together until harvest; then at harvest time I will say to the harvesters, "First collect the weeds and tie them in bundles for burning; but gather the wheat into my barn."'