What is the shortsightedness effect? How does it influence the attractiveness of

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Shortsightedness effect is another potential defect of the political process and comes about because of the inherent short run (shortsighted) bias of politicians. Because politicians want to maximize votes and power, and get re-elected, there will be a bias in favor of programs that have immediate benefits that are easily identifiable, even if the long run costs are much greater that the benefits, especially when the costs are hard to identify. Short run solutions and outcomes will be favored over long run outcomes. Programs or solutions with long run benefits to society will be ignored, like ending sugar subsidies. Inherent bias for short term results even when inefficient (C>B), and a bias to ignore long run solutions even when they are efficient (B>C). Example: deficit spending, where the Government spends more money it takes in (G > T), borrows the money, runs a budget deficit and defers taxes to a later period. The current spending on current programs generates political support from beneficiaries of the spending, and the costs are imposed on future taxpayers, some of whom are not even born yet (some govt. debt is financed for 30 years). "Politicians have a strong incentive to promote programs providing easily observable benefits prior to the next election, even when the true cost of these programs outweighs the benefits for citizens as a group." Pages 141. Example: Program A yields $1 of immediate, visible benefits, but generates $2 in future, difficult-to-identify costs. Program B yields $2 of future, difficult-to-identify benefits, but generates $1 in immediate visible costs. Even though Program B makes the country better off, and Program A makes the country worse off, shortsighted politicians will almost always favor Program A over Program B. The shortsightedness effect of politicians can therefore lead to: a) Economic Inefficiency and b) Misallocation of Scarce Resources. .

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