“Creative Destruction,” “Stimulus,” or “Transfer”…It’s Still The Parable of the Broken Window

It's difficult for me to believe that we still live in a time where taking money from some party and "transferring" it to another is somehow seen as beneficial to any society or economy in any measure whatsoever. It's equally difficult for me to believe that we still live in a time where something of value accidentally or naturally destroyed can ever be seen as a net profit to society or any economy.

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The Broken Window Fallacy

Frédéric Bastiat, The Parable of the Broken Window, from Ce qu'on voit et ce qu'on ne voit pas (That Which is Seen, and That Which is Not Seen), 1850—over 160 years ago.

Have you ever witnessed the anger of the good shopkeeper, James B., when his careless son happened to break a square of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation - "It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade - that it encourages that trade to the amount of six francs - I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! your theory is confined to that which is seen; it takes no account of that which is not seen."

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

Let us take a view of industry in general, as affected by this circumstance. The window being broken, the glazier's trade is encouraged to the amount of six francs; this is that which is seen. If the window had not been broken, the shoemaker's trade (or some other) would have been encouraged to the amount of six francs; this is that which is not seen.

And if that which is not seen is taken into consideration, because it is a negative fact, as well as that which is seen, because it is a positive fact, it will be understood that neither industry in general, nor the sum total of national labour, is affected, whether windows are broken or not.

Now let us consider James B. himself. In the former supposition, that of the window being broken, he spends six francs, and has neither more nor less than he had before, the enjoyment of a window.

In the second, where we suppose the window not to have been broken, he would have spent six francs on shoes, and would have had at the same time the enjoyment of a pair of shoes and of a window.

Now, as James B. forms a part of society, we must come to the conclusion, that, taking it altogether, and making an estimate of its enjoyments and its labours, it has lost the value of the broken window.

When we arrive at this unexpected conclusion: "Society loses the value of things which are uselessly destroyed;" and we must assent to a maxim which will make the hair of protectionists stand on end - To break, to spoil, to waste, is not to encourage national labour; or, more briefly, "destruction is not profit."

What will you say, Monsieur Industriel -- what will you say, disciples of good M. F. Chamans, who has calculated with so much precision how much trade would gain by the burning of Paris, from the number of houses it would be necessary to rebuild?

I am sorry to disturb these ingenious calculations, as far as their spirit has been introduced into our legislation; but I beg him to begin them again, by taking into the account that which is not seen, and placing it alongside of that which is seen. The reader must take care to remember that there are not two persons only, but three concerned in the little scene which I have submitted to his attention. One of them, James B., represents the consumer, reduced, by an act of destruction, to one enjoyment instead of two. Another under the title of the glazier, shows us the producer, whose trade is encouraged by the accident. The third is the shoemaker (or some other tradesman), whose labour suffers proportionably by the same cause. It is this third person who is always kept in the shade, and who, personating that which is not seen, is a necessary element of the problem. It is he who shows us how absurd it is to think we see a profit in an act of destruction. It is he who will soon teach us that it is not less absurd to see a profit in a restriction, which is, after all, nothing else than a partial destruction. Therefore, if you will only go to the root of all the arguments which are adduced in its favour, all you will find will be the paraphrase of this vulgar saying - What would become of the glaziers, if nobody ever broke windows?

Now, a few words from a few of your current crop of leaders imbeciles...

Paul Krugman, September 11, 2001 terror attacks:

Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good.... First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I've already indicated, the destruction isn't big compared with the economy, but rebuilding will generate at least some increase in business spending.

The Economist, "Cash For Clunkers" program:

The boost in demand that the rebates have brought about is exactly the sort of stimulus that is urgently needed to escape what John Maynard Keynes called a “liquidity trap”. According to his theory, consumers may become so worried about the economy that they cling to as much liquid wealth as possible, cutting their spending sharply and thereby triggering precisely the slump they feared. Moreover, as stimulus policies go, cash-for-clunkers looks to be unusually effective.

C. Fred Bergsten, about the 2004 Indian Ocean earthquake and tsunami:

"Perverse as it seems, disasters of this type usually do have positive long-term effects. The reconstruction process itself requires a lot of new investment, some of it in this case financed by foreign assistance, but there will be new investment, that will create construction contracts, that will generate jobs, that will boost economic growth, in the short to medium run. Moreover, even for the longer run, the reconstruction may produce more efficient facilities and more extensive facilities ... when they put down new resort hotels, they'll be more more modern, they'll be more attractive, they'll probably bring in more people in the future. So again, though it seems perverse, the net effect of these things frequently is to boost economic activity, at least for the short to medium run, and to improve the underlying infrastructure and therefore the long-term prospects as well." He continues with examples like Germany and Japan after World War II, and other wars and disasters.

Lawrence Summers, March 2011 Japan earthquake:

Friday's massive earthquake is yet another challenge to Japan's recovery but it may provide a jolt to the economy over the short term, Lawrence Summers, president emeritus of Harvard University and former director of the White House National Economic Council, told CNBC. The biggest earthquake in 140 years hit Japan Friday, triggering 10-meter high tsunami waves. "If you look, this is clearly going to add complexity to Japan's challenge of economic recovery," Summers said. "It may lead to some temporary increments, ironically, to GDP, as a process of rebuilding takes place." After the Kobe earthquake in 1995 Japan actually gained some economic strength due to the process of reconstruction, he added.

Just a final thought.

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BIG DIFFERENCE

So most of this dealt with so-called "creative destruction" and its "stimulus" effect. How about "transfers?"

In economics, a transfer payment (or government transfer or simply transfer) is a redistribution of income in the market system. These payments are considered to be exhaustive because they do not directly absorb resources or create output. In other words, the transfer is made without any exchange of goods or services. Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses (firms). [emphasis added]

In other words, if the State takes $100 you were going to spend on groceries (goods) or a concert (services) and gives it to someone else who spends it on goods and/or services, nothing has happened in economic terms. You're just a cog in the machine. So let's examine a different sort of transfer, one that's not included in the parable, above, but in fact makes it much worse if integrated and considered.

All of this "creative destruction" and "stimulus" the government oversees comes at significant overhead. All figures from the US Census Bureau, 2011 data.

  • Total federal, state and local employees: 22,267,206 (that's Million with an 'M')
  • Total federal, state, and local employee monthly payroll: $86,496,208,598 (that's Billion with a 'B')
  • Total federal, state, and local employee annual payroll: $1,037,954,503,176 (that's Trillion with a 'T')
  • Total US Population: 314 Million
  • Share of monthly payroll attributable to each man, woman, child and infant: $275.47
  • Share of annual payroll attributable to each man, woman, child and infant: $3,305.59
  • What a family of 4 pays annually for federal, state and local government payroll: $13,222.36

OK, just so we're clear here, that 13K is only for the payroll. It's not for the buildings, cars, trucks, equipment, procurements, maintenance, upkeep, INTEREST PAYMENTS ON THE $16 TRILLION WITH A 'T' NATIONAL DEBT, or PENSIONS... et cetera, et cetera.

Let's not quibble over what portion of that represents things you'd need or want to buy in terms of services anyway. The difference is that for one, it's your choice to buy such services or take your chances. Second, you would be buying from a competitive marketplace where cost control is paramount and turning a profit over time mandatory. Go ahead, tell me about fire, police, courts and military. How often does the average person actually use these services? Three thousand or 13 thousand per year, year in and year out?

...Or, in terms of the glazier, this was a direct payment of 6 francs from James B. to the glazier, presuming that other glaziers would have offered comparable prices and quality of service. But it could have been worse. In a world of government transfers, James B. has to make 9 francs, because 3 francs go to Uncle Sam. And the glazier doesn't actually get 6 francs, but only 4.5.

So in reality, James B. is 9 francs worse off—as well as being worse off for not having new shoes—the glazier only 4 francs better off, the shoemaker is 6 francs worse off and the agent of transfers (Uncle Sam) is 8 francs better off (he'll get his 3 franks from the shoemaker one way or another).

So there, if you've read and understood this, I proclaim you smarter than Paul Krugman (proof that the Nobel Prize for anything but the hard sciences is a joke), The Economist, C. Fred Bergsten, and Lawrence Summers.

Now go forth and prosper in spite of it all, because nobody gets out alive, and time is short.

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Comments

  1. Mr Dave says:

    Not to quibble but creative destruction applies to the death of an industry, actually the accumulation and annihilation of wealth. in short the replacement of one economic order with another. Such as the textile industry in NY, declining as the financial service industry grew, or horse drawn carriage makers being replaced by automakers.

    I occasionally read Krugman, I wonder if he means what he says sometimes.

    The transfers are worse then you say, because they are taking from the productive, and giving it to the unproductive. Its not transfer from on $100 grocery shopper to another. Its a transfer from successful industry to failing industry, or productive citizens to unproductive.

    In terms of transfers to government, from private sector. They’ll tell you wouldn’t be successful without them…. you didn’t build that…

    we disagree on the no versus some government. we had the discussion before. I would argue it isn’t the firemen, police and courts that are breaking the bank. Its all the other shit, the 6 figure school administrator, the union public transit workers making 90 grand, and the so called safety net that is subsidizing failure. We have a government that is doing too much. We subsidize alpacas. WTF

    http://profitingwithalpacas.com/tag/section-179-depreciation-deduction/

    • Yes, of course, but that’s typically because something else has come into replace it, Buggy Whips, for instance, from DeVito’s awesome speech to the stockholders in Other People’s Money. Another time would be bankruptcy of a company where assets get repurposed to more productive and profitable ways.

      But notice, in both os these cases it’s not really _destruction_, it’s making way for new, better, more value, more profit, sales, jobs, and so forth.

      Firemen, police, teachers and other state and local employees are what’s breaking the bank. Pensions. California is totally fucked. Most of these folks are working for 10 cents on the dollar after 30 years (yea, they retire with 90% of highest pay for life).

    • Mr Dave says:

      You are right. Some of the state govs have gone off the deep end on the pensions. Many of the benefits are far more generous that the federal level. I still think its many of the other things that destroy the budgets. Politicians roll out the fire fighters and police every time there is a budget crunch, and say look we have cut them if we cut the budget. But the are all these other programs and offices that never really get looked at for cuts.

      On federal level there are so many direct transfers of capital, so much of the spending is beyond roads, bridges, or some regulatory structure and the military. Anyway, I mostly agree with the gist of your post.

  2. re: The Sequester
    You’re on to something here: the sequester is a “bad” idea; “they” just need to spend even more and faster. Then they’ll make it to the other side. [/sarc]

    I’ve got a parachute but its packing is suspect, it appears bugs have been living in it and even if it “works” there don’t appear to be any “good” landing spots available.

    • You need a golden parachute not a gold or anything colored one. That parachute will not break. But landing maybe a problem :-(. Nothing is very safe during a hyperinflation. Read fofooa.blogspot.com.
      I am hoping for a faster arrival to the other side. This waiting stuff is very boring. And the good thing is I am not in the USA :-).

    • As I explain in my other post, anand, gold is a fine hedge against inflation (cash for deflation). 10-15% of your net worth in physical gold held securely and you’ll be in pretty good shape.

      As money, or forced backing for money? Chipmunks and squirrels.

    • In the last ten years, gold’s low was $320 and its high was $1890, when the economy shit the bed. I’d take a 6x increase on my money anyday. Gold was quite stable over for the 20 years prior to the collapse, though. I know people who are buying up silver now, too, since it’s easier to afford compared to gold, but it seems like the wrong time to buy precious metals. There’s been a steady drop over the past year in it’s value. It seems like this drop will continue for a while. Any thoughts on this?

    • Agreed. With two points.

      We are not going to have a deflation. Access to a printing press guarantees that there will be no deflation in USD terms. Actually the access to the printing press guarantees hyperinflation :-).

      Present situation is such that Gold is extremely undervalued. While everything else worth investing is overvalued including Real Estate. This means that going all-in in gold makes sense. 10-15% is better than nothing.

      Gold is undervalued because of paper gold. You need futures for stuff that has a cyclical production. Gold on the other hand is always there. There is 170,000Tonnes of gold while only 2500tons is produced a year. This means that the production is not really required. The only reason why we need the production is to keep it available in the market. 4500tons is consumed by the eastern world. The western world provides the remaining 2000tons. If the production stops, there will be too little gold for the eastern people. The eastern people do not care about the paper gold. So the prices of the two will diverge.

      The eastern people consume gold in currency terms so if the gold prices increase we buy less gold in weight. If the gold price reduces we consume more.

      The current low price is problematic in many ways. If it goes a couple of hundred below, mine production will be hampered. If that happens, Eastern world will want more gold, while the availability will reduce drastically. This would mean that the price of paper gold will diverge from the price of physical gold. The two will be separated out.

      The paper gold cannot survive if it is not correlated to the physical. It will die out, and physical gold will be inflated to absorb the demand for physical. At that price gold requirement will actually increase in monetary terms instead of decreasing. So less than 3000tons of gold will be quenching the thirst for about 10000tons of gold. The price will be instantaneously 3 times. The price will be only starting to increase, as the supply from the western countries will trickle down to nothing.

      There are also giants that cannot buy gold at the present time, because of the supply issue and will want to get into gold.

      There is a whole lot of paper gold trading that happens. It is at least 22 times physical trading. Some of that money will also move into physical gold, inflating gold further. Admittedly it will not be that much, as much of the money will be lost. That loss might also trigger the next crisis. There is at least 75 trillion worth of paper gold.

      The real problem would be that there will be very little supply. I would think after the dust settles gold will be at least 10 times the present value (in real world terms and not in currency terms).

      Mines will stop production if price of gold goes too high, as the countries will take over the mines. It will be too important for the economy. The only countries that will mine will be those that are in deficit and have no gold, but have mines. I think none of the countries satisfy the three criteria :-). So the mining will probably stop.

    • I am somehow getting fofoa.blogspot.com wrong always.

  3. Excellent work, Richard. May it make a difference, even for just one reader.

  4. The world is going broke. The destructive forces unleashed by food technology are far beyond anything that natural and man made disasters have ever wrought. Rebuilding can take place in the wake of destruction caused by warfare, accidents, earthquakes, and hurricanes. But chronic inflammatory disease, a relatively new development in human history, is an on-going destructive force that curtails economic development and sucks the life out of economic recovery. Here’s what the World Health Organization says about the matter:
    “Non-communicable diseases have been established as a clear threat not only to human health, but also to development and economic growth. Claiming 63% of all deaths, these diseases are currently the world’s main killer. Eighty percent of these deaths now occur in low- and middle-income countries. Half of those who die of chronic non-communicable diseases are in the prime of their productive years, and thus, the disability imposed and the lives lost are also endangering industry competitiveness across borders. ”
    http://www.weforum.org/reports/global-economic-burden-non-communicable-diseases
    Say what you will about protective services supplied by government; those costs are nothing compared to government spending on health care. In addition, those costs are increase dramatically with increases in mental illness, drug abuse, violence of all sorts, and suicides. For example:

    Researcher Joseph Hibbeln notes that eating increased amounts of omega-3 fatty acids can raise concentrations of serotonin in the brain. “Such an alteration in serotonergic function may possibly reduce depressive, suicidal and violent behavior,” he says, but cautions that “these changes have not yet been demonstrated in clinical trials.” Hibbeln and colleagues currently are studying the relationships between omega-3 fatty acids and serotonin and dopamine metabolites in healthy subjects, violent subjects, and early- and late-onset alcoholics. Preliminary research indicates that these relationships are significantly different in healthy subjects than in violent or early-onset-alcoholic subjects.

    Researchers also note that the effects of omega-3 fatty acid deficiencies may explain the reported link between lowered cholesterol levels and increased rates of suicide, homicide, and depression. “When your doctor tells you to lower cholesterol,” Hibbeln n notes, “you usually lower your fat intake”-including the intake of omega-3 fatty acids. http://www.crimetimes.org/99a/w99ap2.htm

    • I think it is more to do with excess of omega6s than deficiency of omega3. Both are antagonists. So if omega6 increases it effectively reduces omega3s for use. You want to avoid all sources of Omega6s and add small sources of Omega3s. Rather than increasing large sources of Omega3s.

  5. Cryptical1 says:

    Fantastic post Richard. Thank you for the effort! I’m enjoying the new direction of this blog.

  6. I’ve worked as a consultant for local. state and federal agencies and noted that 80% of the costs are salary and benefits and you could fire half of the employees without reduction of performance – assuming they remaining employees give 40 hours of work.

    Heck, it would be cheaper and more beneficial to reduce welfare agencies by 75% and just send a check to the needy!

  7. Ulfric M Douglas says:

    Destructive economics are an unavoidable result of modern democracy.
    Dumb shitty voting populace votes for the party who’ll give the dumbrest crappiest least productive members the most handouts … there is NO OTHER OUTCOME of a modern democracy where all the crap is given the vote.
    Solution : take the vote away from citizens with a net negative production level. Simples.

  8. Wouldn’t it be nice if someone who critiqued Keynesian economics understood it. What this critique lacks is an understanding of economic context.

    Lets make this simple.

    1. Scenario 1. (USA 1996)
    The economy is at full employment. Economic growth is good.
    Interest rates are at 5%
    Corporations are hiring, expanding etc.

    I then cut 100 billion in federal spending by firing federal workers.

    Deficit shrinks.
    Workers are able to get jobs in private sector
    Federal reserve is able to offset reduction in demand by lowering interest rates.
    Economy is better off.
    Debt/GDP improves.

    Austerity works.

    2. Scenario 2 (USA 2009 till today, great depression, Japan 1990s)

    Economy is not at full employment.
    Corporate America is deleveraging And not taking on new debt.
    Interest rates are zero.
    Economic growth is slow.
    Corporation have tremendous excessive capacity. They are not hiring and expanding.

    I then cut 100 billion in federal spending by firing federal workers.

    Deficit transiently shrinks.
    These newly laid off Federal workers are unable to find new work.
    They stop spending.
    They obtain unemployment insurance.
    They lose their health insurance.
    They stop making mortgage payments
    Demand for goods and services falls.
    Tax revenue falls.
    Deficit worsens
    Federal reserve is unable to offset reduction in government spending as interest rates are already zero.
    GDP falls
    Debt/ GDp worsens
    Economy falls into recession.

    Austerity becomes self defeating with no improvement in debt/GDP

    In addition, Keynesian economics have made several predictions during this current economic crisis. First, that large government deficits would not lead to a rise in interest rates (true). Second, a large increase in the money supply would not lead to inflation (true). Lastly, that premature austerity would cause economic contraction and worsening debt/GDP. (True. See Greece, UK, Spain, etc)

    It seems like you are able to understand context in nutrition (Low carb diet for fat diabetics, but not high end athletes), but have a blind spot in economics.

    In the US, we don’t have to “break windows.” We have a poorly maintained infrastructure that could be repaired and updated. We also have a lot of idle construction workers that could be easily hired.

    • “Wouldn’t it be nice if someone who critiqued Keynesian economics understood it.”

      Nice way to start off. Hence, you get nothing from me.

    • Mr Dave says:

      Jason,

      what kind of economy do we have if it depends of 1.2 trillion in deficit spending yearly going on half a decade? We were told in Clinton years that balanced budgets caused faith in the country and the economy, and also caused great growth. Now we are told that any move towards a balanced budget is going to cause Armageddon. Why a 3% cut in the budget would result in so many lay offs, deserves some analysis as well. Does it make sense that cutting about 3% of the 3.6 trillion budget is going to stop meat inspections, release detained illegals, stop Air craft carriers from deploying, and cause federal employees to get laid off or furloughed and all the other doomsday things the Pres is telling us.

      I’ll assume you have reading comprehension and some ability to think. Does any of that make sense to you? Is 3% cut in federal spending really going to do all those things? It doesn’t make s sense to me.

      If infrastructure was so bad why did such a small part of stimulus go to that? It was only 68 billion out of 840 Billion. Aside from that, I often drive the highways from Boston to Charleston SC, and have been doing it for 13 years…. There has never been a shortage of highway work being done. Its the biggest crock of shit I’ve ever heard. They fucking tear of and repair the highways endlessly. We are to believe the roads and bridges are now uniquely bad. More bullshit.

    • Mr Dave says:

      few typos in there… but you should get the idea.

    • I just want to point out something I think most Keynesian’s miss. In scenario 2, where does that 100billion come from in the first place and where does it go once its cut? It comes from the productive members of society, and if the government cuts it out and lowers taxes, then it will stay with the productive. They will invest, create jobs, invent products and services, buy lots of stuff, and generally add to the GDP.

      The reason increases in money supply have not caused inflation is because the it is dwarfed by credit destruction.

      http://www.deflation.com/the-secret-word-deflation/

    • Jason, I don’t know if you copy and pasted that or what but that was one of the best explanations of Keynsian economics I’ve ever seen.

      Mr. Dave, I wouldn’t say highway work is a crock of shit expecially when you have such heavy trucks driving on them. It seems to me that highway repair is inevitable.

    • Joshua says:

      The reason Keynesianism doesn’t work and will never work is that fully half of the concept of keynesianism consists of cooling off a hot economy. Exceedingly few politicians are willing to step in when things are good and hike taxes/cut spending.

      The other problem is that in the cool economy scenario, it’s critical to spend the money RIGHT NOW. In today’s bureaucratic environment, we still haven’t spent all of the “stimulus” funds from 2009. Our government is simply incapable of spending that money quickly enough.

      Keynesianism is like communism. It sounds great in concept form, but in practice it goes to hell.

      What’s my solution? Freedom. Getting out of a recession requires incredible action – by individuals. No central authority can effectively coordinate the millions of choices required to regain prosperity.

  9. Ben Graham says:

    Bastiat’s broken window fallacy does not contemplate an economy in the process of deleveraging (i.e. when society is increasing its savings). To continue your analogy, the shopkeeper is already saving a substantial some of his income so he/she wouldn’t increase spending unless his window is broken. Bascially, he already has all the shoes and books he desires. And he’s struggling to put those savings to work . Sales at his shop, because of the depressed economy, haven’t increased in years so it makes no sense for him to invest in more inventory or productive equipment. That’s the key insight of Keynes. That there are periods when too many economic actors are all trying to increase their savings all at the same time. This creates a situation where Total Savings are greater than Total Investments. For this to happen, economic activity has to decrease. Today, we are living through a very rare time. There are very few periods like these in our history. Bastiat might be right 99% of the time, but the current situation is not applicable.

    • So in other words, let’s go out and “break the windows” of rick people and rick companies and get those belts loosened.

      The “key insight” of Keynes is that other people’s money desires, spending, savings and investments were his to tinker with and call it “macro economics.”

  10. I feel that the Krugman et al comments are being given a little bit of unfair treatment, not that I’m a fan or anything. The thing that is not mentioned at all here is insurance money. The insurance money is what is used to rebuild, and without the disaster happening it is effectively locked away in a bank account.

    • “The thing that is not mentioned at all here is insurance money.”

      Yea, the Sumatrans, Sri Lankan’s and Thai we’re just brimming with policies.

      On the other hand, for 911, there were policies and Bush kicked in 20 billion of your money on day 1, as I recall.

    • In Bush’ defense, insurance money takes time to come through, and if we’re being realistic, $20B is very light compared to the insurance payouts on those buildings.

  11. Richard,

    Love the website and the content, disagree with your economic analysis. The economic situation we all are living through is in many ways a unique situation and perhaps the worst in American history excluding the Depression. Banking crisis, stock market crash, housing bubble, global slowdown and consumer fear and uncertainty has not hit like this on a global scale since before WWII. I understand the frustation with the actions of the government, but history and current actions today suggest that it is a likely mistake to pull back before a full recovery. Like nutrition science in humans, much of the problem with economics is that there is no control group. You cannot look to a parallel universe in which policies where conducted differently and determine which was the best course of action. However, you can look at similar situations that are and have occurred, and quite frankly those situations seem to suggest that we are in fact making it worse by trying to make it better, known as the paradox of thrift [also a nutrition corrollary]. Keynes was talking about a specific instance, in which the slump became so long and severe that an economy entered a liquidity trap. Much of the run up of recent debt has been driven by collapse of tax revenues due to the recession and simultaneous increases in spending due to health care, unemployment, food stamps and other such benefits. Keynes’s arguement was that the only player big enough to support an economy in such a scenario was the government. As a believer in the Hayek school [as I assume you are too], I am forced to concede that there are extreme times that call for decisive action and unfortunately it is my opinion that we have been living through such a time. I could argue that we would be better off without any government intervention, but unfortunately we live in a hybrid economy in which the government has been actively involved. [even FDIC insurance makes people lazy about watching their own bank because all risk has been eliminated, which distorts the market terribly, but most people would argue in favor of keeping the FDIC]. So it is hard for me to argue that the way our economy is built that we should not be directly investing at this time. It could soak up some excess unemployment and long term borrowing costs have never been lower. At some point the benefits so outway the costs that it becomes a no brainer. Anyway, starting to ramble a bit. Thanks for the website, I appreciate all the info.

    • “extreme times that call for decisive action and unfortunately it is my opinion that we have been living through such a time.”

      Extreme used to have meaning. It simply does not anymore. Now, extreme means you have to buy you kid’s stylistic fashions at Kmart.

      Not buying it.

      I never excuse force or theft. If you want to steal and kill to your benefit, then go do it yourself.

  12. There is no right way to do something wrong.

    Charity is not a legitimate role of government. Initiating force against individuals, to take what you want by force, in order to fund so-called “noble deeds” is not charity, it is theft. Every “church” that petitions the government for charitable action, is self-defined criminal entity.

    No Gods No Masters. Anarchy is not a campaign.

    Raymond J Raupers Jr.
    aka Woodchuck Pirate USA

  13. “There is no right way to do something wrong.”

    Love it. I’m going to engage in theft over that heretofore, if you don’t mind. :)

  14. I never mind.

    Raymond J Raupers Jr
    aka Woodchuck Pirate USA