Economics

A tax doesn't just move money around — it can destroy some of it

When a tax or price control pushes a market away from its free equilibrium, some mutually beneficial trades simply stop happening. Economist Arnold Harberger showed this lost value forms a small triangle on a supply-and-demand graph, and used it to estimate how much monopolies and tariffs actually cost an economy. Unlike a transfer, that loss benefits no one at all.

Arnold Harberger, Monopoly and Resource Allocation — American Economic Review, Papers and Proceedings, 1954

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