Economic Fallacies from Detroit

When the Senate refused to bailout the auto industry last night, the usual suspects predictably cried out in anguish over the 3 million jobs that would be lost. Of course, as Henry Hazlitt showed, this comes from the fallacy of only looking at the economic consequences of one isolated segment of the population. All we hear about are the workers who will lose their jobs in an unproductive industry–we don’t hear about the impact on those who would have had to pay to support them. Handing over $14 billion to the auto industry may stave off its collapse for a time, but it has to be paid for somehow, and its ultimate effect would be to make the paying segment of the population (which is the much greater segment) just that much poorer.

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