I get frustrated on your behalf with
politicians (frequently egged on by voters) when they sell a bad policy that
will cause net harm to everyday citizens but make them sound virtuous and
progressive. Foolish impositions of obviously inefficient policies always takes
me back to my fundamental political trilemma; are they being dumb, deliberately
misleading, or cowardly in refusing to tell voters the truth? It must be one or
a combination of the three, because this really is basic econ 101: the fact
that someone physically hands over money does not tell us who ultimately bears
the cost of a tax or regulation.
Take minimum wage laws, for instance. While employers appear to “pay” higher wages, the burden is not primarily felt by them. Raising wages above the market equilibrium unnecessarily increases the cost of employing workers - so if it’s plainly obvious that to pass on those costs you have to either reduce hours, hire fewer workers, or raise prices for goods and services, the inefficiencies should be just as obvious. To avoid reduced profits, employers pass the costs in part onto workers in the form of lost employment or reduced hours, and in the largest part onto consumers in higher prices. What the government mandates as higher wages is borne at the shelf with reduced consumer purchasing power, giving citizens a bum deal overall.
It's the same with carbon taxes - politicians make energy and carbon-intensive goods more expensive to produce. And while producers might initially write the cheque to the government, the ultimate burden is passed onto consumers through higher prices, where the reduced demand for taxed goods also lowers production, which also hurts employment and wages, also giving citizens a bum deal overall.
Rent controls are no different. While landlords are legally constrained in the rent they can charge, the “cost” is borne in landlords reducing maintenance, not renting out places they could otherwise, converting rental units to other uses, or investing less in new housing. Every time rent controls have been tried anywhere in the world, they have always been a predictable disaster - especially through shortages, longer waiting lists, lower-quality housing, and lack of investment in houses, once again giving citizens a bum deal overall.
The upshot is, because he or she who physically pays the tax or the cost of regulation is usually not the one who bears its economic burden, this means that the actual costs are thinly (often intangibly) spread in ways to which the average citizen never pays much attention. But they see its effect every time they read about unaffordable prices of goods and services, businesses closing, sectors being short-staffed, shops or pubs shutting down, rising food and energy costs, jobs disappearing, and wages stagnating. Yet rarely do they hold politicians to account for it - so politicians carry on giving citizens more of these bum deals year in, year out.
