Posted on 01/28/2009 1:25:45 PM PST by ancientart
For Christmas, my wife bought one of my sons a T-shirt featuring a complex series of equations that eventually “proved” that one equals two. Like most such joke proofs, the equations featured a cleverly hidden “divide by zero” error, an error that only a fairly competent mathematician was going to catch.
The economic equivalent of the “divide by zero” error is what 19th-century economist Frederic Bastiat called the broken-window fallacy. Suppose, said Bastiat, a shopkeeper has a careless son who breaks one of his shop windows. Those standing by might think that, while the broken window is a misfortune for the shopkeeper, the overall effect isn't bad at all. The shopkeeper will pay the glazier for a new window pane. The glazier will then have more money to spend on something else, and, eventually, the positive ripple effect will greatly exceed the cost of the broken window.
Bastiat pointed out the fundamental error in such thinking. One sees the positive impact of the shopkeeper's purchase of the new window: What one doesn't see is that, had he not had to replace his window, the shopkeeper would have been able to spend the money on other things; perhaps a new pair of shoes and some extra loaves of bread. What the glazier has gained, then, comes with a hidden expense: a loss to the shoemaker and the baker of sales revenue that would have come to them.
Economic hard times invariably produce clever schemes for restoring economic growth, schemes that often have widespread popular appeal. During the Depression, millions of Americans signed on to Francis Townsend's idea of giving everyone over 60 a $200-per-month pension, and millions more joined Huey Long's “Share-Our-Wealth,” society hoping that a massive redistribution of existing wealth would get America going again.
Unfortunately, as appealing as they are, almost all such schemes have hidden within them a variant of the broken-window fallacy. Taking money to spend on government schemes (no matter how well-intended) means less money devoted to business enterprises that, unlike government programs, really do generate wealth - at least, when subjected to the disciplines free markets impose.
The Bush bailout and the Obama stimulus package are typical of broken-window wealth-transference schemes - with the odd twist that, rather than taking from the rich to give to the poor, they transfer wealth - to the wealthy. Billions to the big banks and financial institutions, billions to the car companies, billions to the insurance companies, billions to the victims of Bernie Madoff's Ponzi scheme. To be sure, Obama adds to the pot some measures with working-class appeal - tax cuts, extended unemployment benefits, heating subsidies - but all these programs mean more expense, more billions.
The question is, where are all these billions going to come from? What aren't we seeing?
Well, right now, we're simply going to borrow the money - kicking the responsibility can a bit farther down the road. But with the government already trillions of dollars in debt and with the enormous bill for baby boomer Social Security and Medicare expenses soon to come due, assuming additional government debt almost certainly means that, within short order, we'll be stuck in a Jimmy Carter economy: double digit inflation, 20 percent interest rates and sky high unemployment - unless, of course, we've all of a sudden found a way to make one equal two.
“they transfer wealth - to the wealthy. Billions to the big banks and financial institutions, billions to the car companies, billions to the insurance companies, billions to the victims of Bernie Madoff’s Ponzi scheme”
yeah they take from the ordinary & give to the rich.
communism hasn’t changed. it was always a bunch of crap to make people think it was good
Due to lobbying, etc. most "business" spending is spending by businesses who bribed the government, i.e. the businesses that can't compete on their own.
So whether we give it to government or government cronies is really a coin-toss.
BTT someone please let me know when a picture is posted of the t-shirts.
You can polish dog poop all day long but it’s still dog poop.
If you want to see someone argue that one equals two just listen to Algore today as he tells us that the current freezing weather is caused by gloabl warming.
Nice. The math is good until you cancel (a-b). When playing with variables, it’s easy to forget there are real numbers behind them. When using shortcuts like “cancel (a-b)” it’s easy to forget the mathematical operation behind it, division.
When using words like “bailout,” it’s easy to forget exactly where the money is supposedly coming from.
” When using words like “bailout,” it’s easy to forget exactly where the money is supposedly coming from. “
Another misleading piece of verbal sleight-of-hand — ‘Selling Bonds’ (or ‘Treasuries’) doesn’t sound anything like ‘Borrowing Money’.....
The best math teach I ever had used to get in our faces and tell us “There is no mathematical procedure called ‘Cancel’!!!”.
ping for later
Unfortunately, the logic in the article is far above the heads of the majority of voters today, and most of the elite in Washington are corrupt and know exactly what they are doing, i.e. that what they are doing is a scam.
There are 10 kinds of people in the world. One of them understands binary, the other one doesn’t.
ping
Words do a lot. Math geeks don't say "cancel out" when they divide both sides because it hides the fact that their dividing things; and they don't call it "fuzzy math" which is something else.
I always thought a "bailout" was a bond posted to get someone out of jail, and that buying preferred stock in private banks is a good way to control the money supply like in Section 8 Article I. Giving money to Acorn isn't exactly a 'bailout' either, but imho it's closer.
ha...
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