2011-02-14

Timeless Bastiat

If there's one historical thinker I completely connect to it's Bastiat. His whole thought process mirrors what I have observed. To me, no one speaks more logically than he. Look beyond what you see.

Excerpt:

"The essay applies the same reasoning to other situations in which people often focus only on the immediate impact of economic behaviour, such as military spending, art subsidies or public works programs. What is seen are the jobs of the soldiers, artists or labourers and the ripple effect of their spending. What is unseen is the economic activity foregone by the taxpayers who finance those operations. They would have used those funds to consume other goods and services, thereby spending the same total amount as the state – without wasting resources to collect, budget and spend the money."

Taxes work in the exact same way. People need to start thinking about its ill-effects. Not questioning the unseen consequences of taxes is not only foolish but a dereliction of our responsibility as citizens.

Personally, FDR and the "war led to prosperity" theories weren't meant to be taken at face value. Especially the latter. You can't decimate a civilization that way - twice I might add - and make back all that was lost. Sometimes I wonder if they regained everything.

"Economist Robert Higgs has persuasively argued that while mobilization ended chronic unemployment, actual prosperity only returned after the war. But even without the empirical argument, does the idea that war is economically beneficial make any sense? Can devoting resources to building weapons – goods that destroy other goods (and people) – really make us richer? What if, in order to save lives, the Axis and Allied powers had shot their bullets into the ground, bombed empty fields and sank their own ships at sea? And in that case, could we trigger a boom by simply paying people to dig holes and fill them up? Of course not, even if John Maynard Keynes himself wrote otherwise.



This argument is truly the mother of all broken window fallacies – and one wonders if anyone really believes it. After all, just as no one would tell the hero of Bastiat’s parable to smash more windows, no one would think it makes economic sense to intentionally demolish a city, flood a neighbourhood or start a war. Otherwise, vandalism would not be a crime but a civic duty! As Bastiat explained, “To break, to spoil, to waste, is not to encourage national labour; or, more briefly, ‘destruction is not profit.’” And yet Paul Krugman, among others, insists that spending almost $1.2 trillion on the Iraq and Afghan wars has boosted the US economy (most Americans disagree). Good news, America: a few more terrorist attacks, a couple more invasions, and happy days are here again! If only this kind of thinking were limited to satire."

Same with 9/11. It makes little sense to go through that kind of trouble to make some money. Seems to me there are better less sinister and messy ways to achieve that when you have the resources to do so.

Profits are not tied exclusively to a boom and destruction type of cycle.

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