Wednesday, September 14, 2022

What do the EU and criminals have in common?

Criminals are willing to risk future punishment for the current gains of crime.  In other words they have high discount rates.  It looks as if the EU does as well.

The WSJ reports:

The European Union outlined a sweeping plan to claw back about $140 billion in profits and revenue from companies enriched by soaring energy prices in a bid to stabilize the bloc’s energy markets in response to Russia’s punishing assault on the continent’s economy.

Short-run/immediate/direct impact: 

redistribute some energy companies’ windfall profits and revenue to cushion the blow of high prices for consumers.
Long-run/future/indirect impact: 
Reduced incentive to conserve (demand), develop alternate sources or invest in new capacity (supply).

Bottom line:  EU is fixing todays problems but creating bigger ones in the future. 

The One Lesson of Eonomics: The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.


  1. Won't the tax just be passed on consumers?

    1. Tax burden is split between producers (sellers) and consumers (buyers)