Harberger's triangle
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It has been suggested that this article or section be merged with dead weight loss. (Discuss) Proposed since September 2009. |
Harberger's triangle, generally attributed to Arnold Harberger, refers to the dead weight loss (as measured on a supply and demand graph) associated with government intervention in a perfect market. This can happen through price floors, caps, taxes, tariffs, or quotas. It also refers to the dead weight loss created by a government's failure to intervene in a market with externalities.[1]
The area represented by the triangle comes from the intersection of the supply and demand curves being cut short so that consumer surplus and producer surplus are also cut short. The loss of such surplus, not recouped by e.g. tax revenues, is the dead weight loss.
Some economists like James Tobin have argued that these triangles do not have a huge impact on the economy, whereas others maintain that they can seriously affect long term economic trends by pivoting the trend downwards, thus causing a magnification of losses in the long run.
[edit] References
- ^ "Negative Externality". http://economics.fundamentalfinance.com/negative-externality.php. Retrieved February 11, 2012.
[edit] Further reading
- Hines, James R., Jr. (1999), "Three sides of Harberger Triangles", Journal of Economic Perspectives 13 (2): 167–188, http://www.nber.org/papers/w6852.pdf.
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