Donald J. Boudreaux: Fear of future fallacious
Nearly every popular economic fallacy reflects fear of the future. Although unjustified, such fear is understandable. We're familiar with, and have more or less adjusted to, what exists. But we don't know the future, so it frightens us.
Consider, for example, international trade. When Americans buy more imports, a typical and immediate effect is destruction of some existing U.S. jobs. Likewise for new labor-saving techniques. In both cases, economic theory and history make clear that new and better jobs are eventually created and living standards improve.
Economics and history also make clear that to prevent such trade- and technology-induced job churn is to stifle economic growth. The more unrelenting and widespread are policies that prevent this job churn, the more surely almost everyone is condemned to a future of poverty. (If you doubt me, consider that in 1860, about half of all American jobs were in agriculture. Now ask how prosperous we would be today if our government back then had successfully protected agricultural jobs from being destroyed by then-emerging technologies such as long-distance rail transport, refrigeration and chemical fertilization.)
People who demand economic growth while decrying economic change and its disruptions are deeply inconsistent.
Fear of the future also explains much support for battling recessions with increased government spending — preferably via larger budget deficits. Letting recessions run their course, so unprofitable investments are liquidated and those resources are redeployed to more-productive uses, is not popular. Surely one reason — in addition to mere impatience — is that no one amid any recession can say for certain just what those new and better productive uses are.
Yet another government policy fueled, at least in part, by fear of the future is economic regulation. We demand, for instance, that the Food and Drug Administration peer into the future of all new pharmaceutical products and medical devices before we can purchase them. We want the FDA to permit us to buy only products that it determines are sufficiently safe and effective.
Yet in fact, no pharmaceutical product — indeed, no product of any sort — is perfectly safe. Americans' demand for a future free of risks of medical treatments' severe downsides is not only foolish, it's fruitless. The only way to assure no such unhappy surprises is to prohibit any and all medical advances. But obviously, such a draconian prohibition would mean worse, not better, medical care. We'd be stuck with older, less advanced drugs and devices. And while the consequences of using these older products are more familiar than the consequences of using new products, those familiar consequences would also, on the whole, be worse.
Uncle Sam's seizure of the role of deciding for 325 million Americans whether a pharmaceutical product is acceptable is justified as an attempt to protect us from a dreadful future. But because the FDA discourages development of new drugs and devices, it actually fills our future with more pain and unnecessary death.
Donald J. Boudreaux is a professor of economics and Getchell Chair at George Mason University in Fairfax, Va. His column appears twice monthly.