At the bottom of the interventionist argument there is always the idea that the government or the state is an entity outside and above the social process of production, that it owns something which is not derived from taxing its subjects, and that it can spend this mythical something for definite purposes. What alone counts is the fact that people are forced to forego some satisfactions which they value more highly and are compensated only by satisfactions which they value less. It may subsidize openly or disguise the subsidy in enacting tariffs and thus forcing its subjects to defray the costs. It little matters what kind of administrative procedures the government resorts to for the realization of this effect. It withdraws the factors of production from those branches in which the unhampered market would employ them and directs them into other branches. However, government does not have the power to encourage one branch of production except by curtailing other branches. People expatiate on alleged government encouragement of production. It does not increase production it curtails it. All that a tariff can achieve is to divert production from those locations in which the output per unit of input is higher to locations in which it is lower. In this field the teachings of the classical economists, especially those of Ricardo, are final and settle the issue forever. The correctness of this thesis has been proved in an excellent and irrefutable manner with regard to the historically most important class of government interference with production, the barriers to international trade. If the government interferes with this process, it can only impair satisfaction it can never improve it. Of the most urgent needs of the consumers. On the unhampered market there prevails an irresistible tendency to employ every factor of production for the best possible satisfaction All the subtlety and hair-splitting wasted in the effort to invalidate this fundamental thesis are vain. Such interference makes people poorer and less satisfied. The effect of its interference is that people are prevented from using their knowledge and abilities, their labor and their material means of production in the way in which they would earn the highest returns and satisfy their needs as much as possible. The authority thus eliminates some of the means available for the satisfaction of human wants. Restriction of production means that the government either forbids or makes more difficult or more expensive the production, transportation, or distribution of definite articles, or the application of definite modes of production, transportation, or distribution. The fact that its measure influences the ways of consumption also is, from its point of view, either altogether contrary to its intentions or at least an unwelcome consequence with which it puts up because it is unavoidable and is considered as a minor evil when compared with the consequences of nonintervention. The government wants to interfere with production. But this again, in the case of the restrictive measures we are dealing with in this chapter, is not the primary end the authority aims at. Like any other act of intervention, such restrictive measures affect consumption also. The characteristic mark of restrictive interference with production is that the diversion of production is not merely an unavoidable and unintentional secondary effect, but precisely what the authority wants to bring about. Each authoritarian interference with business diverts production, of course, from the lines it would take if it were only directed by the demand of the consumers as manifested on the market. WE shall deal in this chapter with those measures which are directly and primarily intended to divert production (in the broadest meaning of the word, including commerce and transportation) from the ways it would take in the unhampered market economy.
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