Posted on 02/05/2020 7:22:11 AM PST by Kaslin
I have been teaching economics since 1967 -- 40 years of it at George Mason University in Fairfax, Virginia. During that interval, economic reality has not changed. Just as Galileo's law about the independent influence of gravity on falling objects has not changed, neither have the fundamental principles of economics. Economics is fun and simple. It's made complicated by some economics professors -- fortunately, not by my colleagues at George Mason University. Let's apply some simple tools of economics to reveal outright myths, lies and tricks.
Who is punished by tariffs on imported goods? Let's go through the steps. The Canadian government imposes high tariffs on American dairy imports. That forces Canadians to pay higher prices for dairy products and protects Canada's dairy producers from American competition. What should be the U.S. government's response to Canada's screwing its citizens? If you were in the Trump administration, you might retaliate by imposing stiff tariffs on softwood products built from pine, spruce and fir trees used by U.S. homebuilders. In other words, the U.S. should retaliate against Canada's harming its citizens by forcing them to pay higher dairy product prices, by forcing Americans through tariffs to pay higher prices for wood and thereby raising the cost of building homes.
Many politicians, pundits and some economists would have us believe that corporations pay taxes, but do they? Economists distinguish between entities who ultimately bear the tax burden and those upon whom tax is initially levied. Just because a tax is levied on a corporation doesn't mean that the corporation bears its burden. Faced with a tax, a corporation can shift the tax burden by raising its product prices, lowering dividends or laying off workers. The lesson here is that only people pay taxes, not legal fictions like corporations. Corporations are simply tax collectors for the government. Similarly, no one would fall for a politician telling a homeowner, "I'm not going to tax you; I'm going to tax your property." I guarantee that it will be a person, not the property, writing out the check to the taxing authority. Again, only people pay taxes.
Here's a question: Are natural or manmade disasters good for the economy? Dr. Larry Summers, top economic adviser to President Obama, said about the Kobe, Japan, earthquake: "(The disaster) may lead to some temporary increments ironically to GDP as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake Japan actually gained some economic strength." After devastating Floridian hurricanes, it's not uncommon to read newspaper headlines such as "Storms create lucrative times," or "Economic growth from hurricanes could outweigh costs," or "It's a perverse thing ... there's real pain, but from an economic point of view, it is a plus." Then there's Nobel Laureate Paul Krugman who wrote in his New York Times column "After the Horror," after the 9/11 attack, "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 do some economic good." He went on to explain that rebuilding the destruction would stimulate the economy through business investment and job creation.
One would never hear my colleagues in George Mason University's economics department spouting such insanities. Just ask yourself whether the Japanese economy would have faced even greater opportunities for economic growth had the earthquake also struck Tokyo, Hiroshima, Yokohama and other major cities? Would the 9/11 terrorists have made a greater contribution to our economy had they also destroyed lives and buildings in Chicago, St. Louis, Los Angeles and Atlanta? The belief that a society benefits from destruction is sheer lunacy.
French economist Frederic Bastiat (1801-1850) explained it in his pamphlet "What is Seen and What is Not Seen." He said, "There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen." That's why my George Mason University colleagues are good economists.
The communist demonKKKrats WANT AMERICANS in slave CAGES!! WAKE UP AMERICA!!!
Faced with a tax, a corporation can shift the tax burden by raising its product prices, lowering dividends or laying off workers.
This reduces the current tax obligations.
Dr. Larry Summers is no Bastiat. The Broken Window Fallacy is pretty basic economics. I’m not surprised that Summers doesn’t get it.
Here’s a question: Are natural or manmade disasters good for the economy?
I have always like Adam Smith in that “Wealth generates more wealth”, or at least should.
His classic example was that lawyers, govt, etc. were a cost center, they did not generate more wealth. We spend much on these things there is no more wealth. But he also said lawyer and govertnment were essential to a degree but keep that degree small.
Yes, the rats spending on social causes generate a lot of economic activity but not wealth. Do not confuse economic activity and wealth.
Summers’ problem is that he does not understand President Trump’s strategy.
The president’s strategy is to make our tariffs so unbearable that the countries affected recognize that tariffs are not a great idea thus forcing them to lower or eliminate their tariff’s in return for the US reducing or eliminating tariffs.
It is the same tactic used in winning wars. Make it so hard on the enemy that he gives up.
Ah yes. The "broken window" fallacy.
French economist Frederic Bastiat (1801-1850) explained it in his pamphlet “What is Seen and What is Not Seen.” He said, “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”
Remember how we all learned systems in school? the blood system, the digestive system, etc. And then how systems interacted with other system? I remember thinking, “wow, how can this all happen?”
The carbon cycle, the nitrogen cycle, photosynthesis, etc.
You can’t control a system. And if a politician admitted that he most lilkely would be electied.
The exemption is Trump. He understands systems and trusts them, that is why he is reducing regulations. He trusts the American People...................
“In other words, the U.S. should retaliate against Canada’s harming its citizens by forcing them to pay higher dairy product prices, by forcing Americans through tariffs to pay higher prices for wood and thereby raising the cost of building homes.”
The problem with this type of a analysis is that it only looks at prices and not jobs. If you don’t have a job you won’t be able to buy anything regardless of how low the price is.
Dr. Williams, you are of course correct in those basic economic principles, but in reality, our nation is so vast and capable that we can function entirely on trade with each other at the state level. If some other country wants to trade with us, we can impose conditions favorable to the USA, and if they want trade barriers, it will hardly affect the US consumer unless we are snobby enough to only demand imported things. WE ARE THE MARKET that everyone wants, and wise presidents will not let foreigners pick and choose the best trade for themselves and the worse elements for us.
“The Broken Window Fallacy is pretty basic economics.”
The real lesson of the “broken window” is the moral failure of using macroeconomics to make decisions vs microeconomics.
From a macroeconics point of view, the broken window makes no difference to the number of jobs generated, the only consequence is the reduction of the aggregate wealth by the cost of the window, vaguely shared by everyone.
From a microeconomics point of view, the differences are enormous for the owner of the window. It’s nothing less than theft, personal dismay, injustice...
Macroeconomics (aggregate) analysis is what is used to justify socialism and communism. From the aggregate point of you it doesn’t matter whether you get to spend your money or the government takes from you and spends on what it wants.
The foreign tariffs also hurt the American companies and workers.
They can’t be allowed to go unanswered, their goal is to reduce our capacity to create wealth while increasing the capacity to create wealth for the country imposing them.
It’s economic warfare, and like all warfare it isn’t profitable in and of itself but it can be profitable if your enemy decides that fighting back is unprofitable and allows you to pillage them at will, fighting back isn’t profitable either but not fighting back causes a much bigger loss.
Way back when credit card interest was deductible, a friend tried to persuade me that credit card debt was a good thing because the interest was deductible. He just couldn’t understand my reasoning as to why it was not.
Yes, he was and still is a democrat, why do you ask?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.