When Governments Confiscate Wealth to Fund Government Programs

Mises Institute

The entrepreneurs try to undertake only such projects as appear to promise profits. This means that they endeavor to use the scarce means of production in such a way that the most urgent needs will be satisfied first, and that no part of capital and labor will be devoted to the satisfaction of less urgent needs as long as a more urgent need, for whose satisfaction they could be used, goes unsatisfied.

When the government intervenes to make possible a project which promises, not profits, but losses, then there is only talk in public of the need which finds satisfaction through this intervention; we do not hear anything of the needs which fail to be satisfied because the government has diverted to other purposes the means of satisfying them. Only what is gained by the government action is considered, not also what it costs.

The economist is not called upon to tell the people what they should do and how they should use their resources. But it is his duty to call public attention to the costs. This differentiates him from the quack who always speaks only of what the intervention gives, never of what it takes.

Let us, for instance, consider a case which we may judge with objectivity today because it is a matter of the past, though not of a very distant past. It is proposed that a railroad, the construction and operation of which does not promise profitability, is to be made possible by a government subsidy. It may be, it is said, that the railroad is not profitable in the usual sense of the word and that, therefore, it is not attractive to entrepreneurs and capitalists, but it would contribute to the development of the whole region. It would promote trade, commerce, and agriculture and thus it would make an important contribution to the progress of the economy. All this would have to be taken into consideration if the value of this construction and operation is to be judged from a higher standpoint than that of profitability alone. From the standpoint of private interests the construction of the railroad may appear inadvisable. But from the standpoint of the national welfare it seems beneficial.

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Source: Ludwig von Mises | Mises Wire

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