Henry Hazlitt well-stipulated his message in Economics in One Lesson, which distinguishes good economists from bad economists. He states that many economists overlook the long-term consequences of a policy and mainly focused to benefit only a particular group as a result of a unique characteristic of the market – that is the driving self-interest of each member of the society (1952).
In other words, many policies fail because they are created by only considering the immediate impact and its consequences to certain groups, neglecting the needs of other groups involved.
Although the market can work solely with its magic using Adam Smith’s invisible hand theory, it is still crucial to have government intervention in order to correct the market failures (Gans et al., 2012).
Hence, it can be determined that policies created by the government are equally crucial in shaping the economy. However, what if these policies are formulated by blinded policy-makers as mentioned in Hazlitt’s claim? Then, it is not far that economic catastrophe follows.
Even if Hazlitt’s book was published over six decades ago and that this issue was identified back then, the tragic reality is that policy-makers still commit the same mistake until now. This paper will examine real world issue to illustrate an example of the fallacies contained in recent policies.
Policy Identified
After Four Corners, an Australian investigative current affairs television program, aired the horrific images of slaughtering cattle in some Indonesian abattoirs in May 2011, many animal welfare groups protested to ban live exports. As a response, on 7 June 2011, the Australian Government imposed a ‘live cattle export ban’ to Indonesia a week after the release of the footage (Department of Agriculture, 2011).
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The ban was lifted after a month (“Government Lifts Live Cattle Export Ban”, 2011).
Analysis
The policy of ‘live cattle export ban’ was immediately created in response to particular groups such as the call from the community and animal welfare groups. It is also understood that the underlying reason of their call is for the better treatment of animals being exported to other countries, which is in fact a good thing. However, this paper is scrutinizing the way in which the policy is created mirroring the fallacies mentioned by Hazlitt.
Firstly, Hazlitt said that “the bad economist sees only what the effect of a given policy has been or will be on one particular group” (p. 4).
As a result of the pressure from few particular groups such as the media, the community, and the animal welfare groups after the harsh footage was aired, the government imposed the ban to Indonesia – the biggest live cattle export market. The pressure must have been too intense that the government impulsively execute the ban overseeing the long-term effect it may have to the economy and its effect to other affected groups such as the graziers in Australia. According to the Department of Agriculture (2014), the live export industry in Australia contributes largely to the Australian economy especially to livestock industry that garnered $996.5 million earnings and opened 10,000 employment opportunities in 2009. Hence, the ‘live cattle export ban’ to Indonesia in 2011 severely impacted this industry. It has been reported by ABC News that the graziers in northern Australia still suffers even two years after enforcing the temporary ban of live cattle exports (Stephens et al., 2013).
As a result of the ban, Indonesia decreased its consumption of Australian cattle, decreasing the price to as low as $20 per head, which is way lower than the costs (Stephens et al., 2013).
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The Mayor of Cloncurry (a town in north-west Queensland) and one of the graziers, Andrew Daniels, described the situation as the “biggest man-made disaster in northern Australia” blaming the Federal Government for imposing the temporary ban of live cattle export in June 2011 (Stephens et al., 2013).
Consequently, the chain reaction was extended to its supporting industries such as the musterers, livestock transporters, and the rural communities who made losses in their businesses. In addition, the ban would cost 1,500 jobs in Indonesian meat industry according to the head of Indonesian Meat Industry Association, Joni Liano, while describing Australian Government as “pressured by only a handful of groups” (Allard & Willingham, 2011).
Hence, it is evident that the impulse enforcement of the ban lead to the economic disaster for livestock and its related industries.
Secondly, Hazlitt (1952) stated that “the bad economist sees only what immediately strikes the eye” (p. 4).
When the appalling images and videos of the slaughtering of cattle in Indonesia was aired, the ban was immediately imposed. Imagine if the truth behind horrifying slaughtering was not exposed by the media. Will the government impose the ban immediately? It is known that the Australian government explicitly condemns any act of cruelty to animals. It is for this reason that the Department of Agriculture formulated strict regulatory framework and ‘Australian Standards for the Export of Livestock’ in handling live animal exports. With such kind intention, it also requires regular monitoring of the conditions of these animals and not only relying on the media to uncover such cruelty before it acts. Also, the ban is too specific – ‘live cattle export ban’ to Indonesia. It leads anyone to ponder upon sensible questions like ‘why the ban was only imposed solely to Indonesia?’ Does it mean that among all the countries that Australia exports live animals to, only Indonesia exploited the standards? Or only Indonesian abattoirs were exposed? Also, ‘why the policy was particularly banning only the export of cattle?’ Does it mean that among all the live animals exported by Australia, only cattle was harshly slaughtered? By imposing the ban with specificity after a week of exposing the slaughtering in Indonesian abattoirs, it is obvious that the government only reacts due to the pressure enforced by few particular groups such as the media, the community, and the animal welfare groups and not because of the underlying objective of non-tolerance to animal cruelty by the government.
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Lastly, Hazlitt (1952) mentioned that “the bad economist sees only the direct consequences of a proposed course” (p. 4).
The main purpose of the ban is to stop the cruelty of some abattoirs in Indonesia in slaughtering the cattle imported from Australia. As the ban lasted for a month, the horrid slaughtering on Australian cattle will eventually cease as there is no more to slaughter. Before the ban was lifted, Indonesian meat industry may have had enough time to look for other options to meet its demand. There were possibilities that Indonesia would start importing from other countries or raise its own cattle farm to reduce its reliance from Australia. Yet, there is no assurance that those cattle will be slaughtered without inducing suffering and torture. Also, the harmonious economic relationship between Australia and Indonesia was at stake after imposing the ban. Indonesia’s Head of Agriculture Department, Bayu Krisnamurthy, commented that the ban seemed to be discriminatory as it is particularly affecting Indonesia and if found to be the case, he was willing to submit a complaint to World Trade Organisation (Allard & Willingham, 2011).
Hence, the only direct consequence is addressed by the government in imposing the ban without considering the larger picture.
Conclusion
In view of the self-interested mechanism that drives the economy, it is very easy for everyone to get trapped by the economic fallacies, which had once imprisoned our ancestors before and still continuously tricking our leaders today. This paper showed how these fallacies still exist in our real world today by magnifying to the details of ‘live cattle export ban’ imposed to Indonesia by the Australian government in June 2011. Therefore, Hazlitt imparts a valuable lesson to us in his book Economics in One Lesson and that is – in order not to fall into the economic fallacies, policy-makers and economists need to take into account the direct and indirect, and short and long-term consequences to all the groups involved considering the bigger picture.
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References
Allard, T. & Willingham, R. (2011, June 9).
Indonesia Cries Foul Over Live Cattle Export Ban. The Age, p. 5.
Department of Agriculture. (2011, July 27).
Australian Government action on live exports. Retrieved from .
Department of Agriculture. (2014, March 20).
Live Animal Export Trade. Retrieved from .
Gans, J., King, S., Stonecash, R., & Mankiw, N. G. (2012).
Principles of Economics. South Melbourne, Australia: Cengage Learning Australia.
Government lifts live cattle export ban. (2011, July 6).
ABC News. Retrieved from http://www.abc.net.au/news/2011-07-06/government-lifts-live-cattle-export-ban/2784790.
Hazlitt, H. (1952).
Economics in One Lesson (Special edition for The Foundation for Economic Education, Inc.).
New York, USA: Harpers & Brothers.
Stephens, K., Poyhonen, N., & Tapiolas, P. (2013, May 6).
Live Export Ban a ‘Disaster’ for Northern Australia. ABC News. Retrieved from http://www.abc.net.au/news/2013-05-06/live-export-ban-a-disaster-for-northern-australia/4671318.
