Incentives work, even when they’re perverse.
Exactly! And incentives are the key to the failure of progressivism. As I wrote three years ago:
Modern-day liberalism has not been thought to have such a consistent theme. It appears to be a mishmash of grievance, entitlement, guilt, envy, group identification, deification of elected leaders, and love of big government.
Until now. I believe the unifying theme of modern-day liberal positions is the inability to recognize the incentive effect.
The media and liberals (but I repeat myself) have a myopia where they obsess on first-order effects and do not recognize second-order effects. Incentive effects are a complete mystery to them.
The terminology has changed. “Liberals” are now “progressives” (which liberates the term “liberals” back to its noble classical liberal origins). But the General Theory is stronger than ever, and the failure of progressives in power to understand incentive effects is largely responsible for the disastrous fiscal and economic situation the U.S. finds itself in.
Firing all the (Keynesian) macroeconomists and hiring a few microeconomists would be a good start.