Three farmers, a plow, and the Government (a little lesson in Socilaist econ.)

"That which is seen, and that which is not seen" | 1847 | C. Frederic Bastiat,

[yankeedame]

Taken from the "That which is seen, and that which is not seen." by the French economist

(Claude) Frederic Bastiat, 1801-1850.

=================================================

"We will suppose that there is but one plough in the world, and that two farmers wish to borrow it.

"Farmer Peter is the owner of the only plough which is to be had; Farmer John and Farmer James wish to borrow it.

"Farmer John, by his honest, his property, and good reputation, offers security. He inspires confidence; he had credit. Farmer James inspires little or no confidence. It naturally happened that Farmer Peter lends his plough to Farmer John.

"But now, according to the Socialist plan, the State interferes, and says to Farmer Peter, 'Lend your plough to Farmer James. I will guarentee its return, and this guarentee will be better than Farmer John's, for he has no one willing to guarantee for him but himself; but I, althought it is true that I have no money, I gather and dispose of the money of the tax-payers, and it is with their money that I guarantee I shall pay you the principle and interest, should be become necessary'.

"Consequently, Farmer Peter lends his plough to Farmer James: this is what is seen.

"And the Socialists rub their hands, and say, 'See how well our plan has worked. Thanks to the intervention of the State, poor Farmer James can now plough. He will no longer be forced to dig the gound, he can now plough; he is on the road to make a fortune. It is a good thing for him, and an advantage to the nation as a whole'.

"Indeed, gentlemen, it is no such thing; it is no advantage to the nation, for there is something behind which is not seen.

"It is not seen that if Farmer James ploughs instead digs, Farmer John will be reduced to the necessity of digging instead of ploughing.

"That, consequently, what was considered an increase brough about by a loan, is nothing but a displacement of a loan. Besides, it is also not seen that this displacement implies two acts of deep injustice.

"The first is an injustice to Farmer John, who, after having deserved and obtained credit by his honesty and activity, sees himself robbed of it.

"The second is an injustice to the tax-payers, who are libel to pay a debt which is of no concern of theirs.

"Will anyone say that Government offers the same facilities to Farmer John as it does to Farmer James? As there is only one plough to be had, two cannot be lent....It is true I have reduce the operation to the most simple expression of it, but if you submit the most complicated Government institutions of credit to the same test, you will be convinced that they can have but one result -- to displace credit, not to augment it.

"In any one country, in a given time, there is only so much capital available, and all of it is being put to use. In standing as security for the the non-payers, the State,therefore, increases the number of borrowers, and thus raise the rate of interest (always to the disadvantage of the tax-payer), but it has no power to increase the number of lenders."

[yankeedame]

Had to type this is, so any typos, etc. are mine. --YD

[spinestein]

"In any one country, in a given time, there is only so much capital available, and all of it is being put to use. In standing as security for the the non-payers, the State,therefore, increases the number of borrowers, and thus raise the rate of interest (always to the disadvantage of the tax-payer), but it has no power to increase the number of lenders."


This idea had to be ignored by the Marxists and their modern derivatives until it was "rediscovered" and made popular in the 1980's. The economists who continue to preach otherwise should be embarrassed to go out in public... but they aren't.

[rawhide]

Good and so true even today. Thanks.

[al_again]

just to be argumentative: change the scenario a little. Say Farmer Peter had two plows - but was unwilling to lend one of his plows to farmer James because he did not have sufficient capital or an established credit history.

In this scenario - the government steps in and acts as a guarantor for the loan which allows both farmers James and John to plow their lands.

Is this to the disadvantage of the taxpayers? Are the taxpayers really disinterested parties? For instance, say that as a result of being able to obtain the plow farmer James was extremely successful. This success allowed him to obtain more lands and hire workers to tend to the land.

This author is over simplifying, making incorrect assumptions, and drawing false conclusions.

[Cicero]

Or then again, suppose Farmer Peter lends his second plow to Farmer James, and he breaks it? Immediately the food producing capacity of the village is cut in half.

This is why economics is called the Dismal Science. There's always another point of view that seems reasonable, until . . . .

[ThePythonicCow]

You assumptions are less likely, and more remains hidden behind your scenario. You changed the scenario to one where a plough went unused, because the last remaining user was not credit worthy. But resources seldom go unused for lack of credit.

More importantly, you left unspoken the deep danger behind your scenario. When we enpower the government to maximize the utilization of resources, we enpower it to impoverish us all. When we replace the ideal of to each according to their own efforts with the ideal of to each equally, we destroy the foundation of freedom, which is based on equal opportunity offering each what their abilities and efforts can obtain, and replace it with the foundation of socialism, which is based on equal results, taking from each what they earn to enpower the rulers.

[WorkingClassFilth]

In a similar vein, here's a re-write of history somebody sent me and it explains a lot...

History of the world

History began some 12,000 years ago. Humans existed as members of small bands of nomadic hunter/gatherers. They lived on deer in the mountains during the summer and would go to the coast and live on fish and lobster in winter.

The two most important events in all of history were the invention of beer and the invention of the wheel. The wheel was invented to get man to the beer. These were the foundations of modern civilization and, together, were the catalyst for the splitting of humanity into two distinct subgroups: Liberals and Conservatives.

Once beer was discovered, it required grain and that was the beginning of agriculture. Neither the glass bottle nor aluminum can was invented yet, so while our early human ancestors were sitting around waiting for them to be invented, they just stayed close to the brewery. That's how villages were formed.

Some men spent their days tracking and killing animals to barbecue at night while they were drinking beer. This was the beginning of what is known as "the Conservative movement."

Other men who were weaker and less skilled at hunting learned to live off the Conservatives by showing up for the nightly barbecues and doing the sewing, fetching and hair dressing. This was the beginning of the Liberal movement. Some of these liberal men eventually evolved into women. The rest became known as girlymen.

Some noteworthy liberal achievements include the domestication of cats, the invention of group therapy, group hugs and the concept of Democratic voting to decide how to divide the meat and beer that Conservatives provided.

Over the years, Conservatives came to be symbolized by the largest, most powerful land animal on earth, the elephant. Liberals are symbolized by the jackass.

Modern Liberals like imported beer (with lime added) (& foo foo coffee), but most prefer white wine or imported, bottled water. They eat raw fish but like their beef well done. Sushi, tofu, and French food are standard Liberal fare.

Another interesting evolutionary side note: Most of their women have higher testosterone levels than their men. Most social workers, personal injury attorneys, journalists, dreamers in Hollywood and group therapists are Liberals. Liberals invented the designated hitter rule because it wasn't "fair" to make the pitcher also bat.

Conservatives drink domestic beer. They eat red meat and still provide for their women. Conservatives are big-game hunters, rodeo cowboys, lumberjacks, construction workers, firemen, medical doctors, police officers, corporate executives, fighter pilots, athletes and generally anyone who works productively outside government. Conservatives who own companies hire other Conservatives who want to work for a living.

Liberals produce little or nothing. They like to "govern" the producers and decide what to do with the production. Liberals believe Europeans are more enlightened than Americans. That is why most of the Liberals remained in Europe when Conservatives were coming to America. They crept in after the Wild West was tame and created a business of trying to get MORE for nothing.

Here ends today's lesson in world history. It should be noted that a Liberal will have an uncontrollable urge to respond to the above instead of simply laughing and deleting or forwarding it.

[John Valentine]

This author is over simplifying, making incorrect assumptions, and drawing false conclusions.

No, YOU are. The author's point is absolutely correct, both as to the larger point, and to his example.

Your example is flawed, for you assume idle capital (the unused plow). This is precisely the condition that was disavowed by Bastiat's example, and rightly so.

[John Valentine]

This author is over simplifying, making incorrect assumptions, and drawing false conclusions.

No, YOU are.

The author's point is absolutely correct, both as to the larger point, and to his example.

Your example is flawed, for you assume idle capital (the unused plow). This is precisely the condition that was disavowed by Bastiat's example, and rightly so.

[ThePythonicCow]

There are another 12 such fables by Frederic Bastiat at Freedom's Nest. See the page THAT WHICH IS SEEN, AND THAT WHICH IS NOT SEEN.

[al_again]

As I said - the only reason for my post was to be argumentative. I do believe the authors words to be flawed but I don't have the patience to argue economics this evening.

competionalism vs capitalism --- which is better?

[flashbunny]

" This author is over simplifying, making incorrect assumptions, and drawing false conclusions."

Yeah, you're obviously a superior economic intellect to frederic bastiat.

HAH.

[yankeedame]

When we enpower the government to maximize the utilization of resources...

...we then surrender our power to decide -- for ourselves, our needs, and for our lifestyles -- the worth of available recourses and to abide by the government's decision(s)-- no matter what the personal, perhaps even intense, inconvenience.

It reminds me of Mao shouting about how the Chinese were crying out for scare consumer goods. "They want toilet paper, bobby pins and shoelaces! Don't they see I'm building them a Socialist future??"

[LibertarianInExile]

Gosh, what does this say about student loans, VA loans, FHA loans, SBA loans...etc.?

...waits for "conservatives" to defend those programs...

[samtheman]

Farmer Peter has the plough. Obviously he isn't much of a farmer, since he's more interested in loaning it out than using it. And of course he'll loan it out to Farmer James, since that loan is backed by the government and Farmer Peter doesn't even care if he ever gets the plough back because once the government starts making the rent payments it forgets who actually has the plough and the payment to farmer Peter just becomes part of the yearly entitlements in the budget and can't be touched.

Meanwhile, Farmer James never wanted to use the plough either but all along just wanted to get his hands on it so he could sell it to Farmer John. And since Farmer James got the plough for free, he sells it to Farmer John for below market value, which makes Farmer John happy and wealthy, since he's the only farmer actually interested in planting a crop and is now able to pocket extra money saved on the cost of the plough.

It turns out, in fact, that Farmer John, as good as he is at farming, is even better at business and finds out that he can sell his grain to the Chinese for a lot more money than he can on the open market at home. He doesn't worry about the question of where the Chinese are getting all the money to outbid the domestic market. That's not his concern.

Until the taxman comes, sent by Farmer Peter, who is now a lawyer and working for the government. It seems the government needs a lot more money and has to raise taxes to get it. They've just instituted a new plan, you see, which is lending money to the Chinese so they can buy Farmer John's grain.

Farmer John can't afford to pay the taxes and tries to sell his plough on the open market to cover the tax bill. But it seems the Chinese, now freed from the burden of planting grain, are making ploughs. And with another loan they secured through the lobbying efforts of Farmer Peter, they are able to ship those ploughs across the sea to sit, new and shiny and underpriced, for sale next to Farmer John's old plough.

Farmer John has gone into bankruptcy but Farmer Peter says he has a plan to help him.

[yankeedame]

Or then again, suppose Farmer Peter lends his second plow to Farmer James, and he breaks it? Immediately the food producing capacity of the village is cut in half.

Ah, but only temporarily so. With the food production now half of what it was, and price paid for food will go up,up,up the (smart) farmers will put more acreage to crop. Granted they have no plows but they can still "dig" (hoe) the soil. Granted, not as much will be planted as there would be if the land were plowed, but there will still be much more than if nothing were done with the land.

Also, last but not least, the fact that if there are no longer any plows -- and therefore the $$$ a new plow will command -- it is more than likely that someone (or several someones) will design/tinker together/build/create a new plow or a new kind of plowing tool.

[ThePythonicCow]

Centralized power attracts the corrupt. Most of our national "leaders" are men profoundly lacking in integrity, adept at presenting what they think will gain them public power, devoid of principle.

The more powerful our government becomes, the more it attracts such frauds.

[LibertarianInExile]

"Say Farmer Peter had two plows - but was unwilling to lend one of his plows to farmer James because he did not have sufficient capital or an established credit history. In this scenario - the government steps in and acts as a guarantor for the loan which allows both farmers James and John to plow their lands.

Is this to the disadvantage of the taxpayers? Are the taxpayers really disinterested parties? For instance, say that as a result of being able to obtain the plow farmer James was extremely successful. This success allowed him to obtain more lands and hire workers to tend to the land."

1) Yes, it is to the disadvantage of the taxpayers. First, taxpayers are subsidizing a use that is not optimal. It might be that the additional plow would be sold for money used to buy a tractor, or the second plow would be used to finish other land more quickly and the more productive farmers can turn their activity to even MORE productivity. Giving the plow to James thus exposes taxpayers to the possibility of James' default AND the lack of the optimum utility of that plow--a utility BEST decided not by government but by the free market.

2) Of course the taxpayers are not disinterested--they pay taxes AND they pay for commodities. Both could be affected by this misuse. Agricultural subsidies in the form of, say, free plows for all farmers, would be just as abusive as this seemingly innocuous subsidy.

3) Say James WAS successful--because he got a cheaper plow! Someone else was NOT as successful, because James got to a plow at a cheaper rate than that unsubsidized farmer, and farmers like this someone else, and John, actually ended up paying a higher tax rate than they should have, to ensure the government had the money necessary to cover losses by people LIKE James.

[ThePythonicCow]

So you post an argument, but when I respond in kind, you object that you lack the patience to argue. Then you ask a question - though since it uses a word that neither I nor Google have ever heard of, the question is not conducive to much discussion.

I don't have further patience for you tonight - sorry ;).

[TBP]

Next, maybe the broken window fallacy.