Editing Deadweight loss (section)

==Harberger's triangle==
[[File:TaxWithTax.svg|thumb|The deadweight loss is the area of the triangle bounded by the right edge of the grey tax income box, the original supply curve, and the demand curve. It is called Harberger's triangle.|250px]]

Harberger's triangle, generally attributed to [[Arnold Harberger]], shows the deadweight loss (as measured on a supply and demand graph) associated with government intervention in a perfect market. Mechanisms for this intervention include [[price floor]]s, [[price ceiling|caps]], taxes, tariffs, or quotas. It also refers to the deadweight loss created by a government's failure to intervene in a market with [[externality|externalities]].<ref>{{cite web | url=http://economics.fundamentalfinance.com/negative-externality.php | title=Negative Externality | access-date=February 11, 2012}}</ref>

In the case of a government tax, the amount of the tax drives a [[tax wedge|wedge]] between what consumers pay and what producers receive, and the area of this wedge shape is equivalent to the deadweight loss caused by the tax.<ref>{{Cite book|title=Public Finance and Public Policy|last=Gruber|first=Jonathan|publisher=Worth Publishers|year=2013|isbn=978-1-4292-7845-4|location=New York}}</ref>

The area represented by the triangle results from the fact that the intersection of the supply and the demand curves are cut short. The consumer surplus and the producer surplus are also cut short. The loss of such surplus is never recouped and represents the deadweight loss.

Some economists like [[Martin Feldstein]] maintain that these triangles can seriously affect long-term [[Economic indicator|economic trend]]s by pivoting the trend downwards and causing a magnification of losses in the long run but others like [[James Tobin]] have argued that they do not have a huge impact on the economy.