I just picked up what is now probably a forgotten book, Henry Hazlitt's Economics in One Lesson.
The books starts with the fallacy of the baker's window.
Some local hood decides to throw a brick through the baker's store window. As the neighbors are standing around and talking about it later they realize that it is actually a windfall for the glazier, who will make $250 ($2500) from the repair. The glazier will then spend at least part of that money at the butcher's. And the butcher will spend part of his money with the fish monger. So the $250 will actually help all these people. Now the hoodlum looks more like a hero, helping to stimulate the economy.
But Hazlitt points out the fallacy of all this because of a character we dont see: the tailor. See, the baker was about to go buy a suit. But now he has to replace the window instead. So the glazier benefits only from the misfortunate of the tailor, who won't get the money. No wealth has been created in the window breaking, only moved around.
The Obama Administration needs desperately to read and understand this. The cash for clunkers was a great example of this fallacy. The gov't took the money from somewhere. Someone got taxed for it. Even if the money was borrowed (which it was) someone down the road will pay for it in taxes. Here, the car maker is the glazier and everyone else is the tailor. No wealth was created by this boondoggle. Add in the transaction cost of gov't taking money from one person and giving it to another and it is a net loss.
The program won't even save gasoline, as new cars are driven more than old ones.
Joe Biden said it was one of the most succesful programs they had.
So we have the most clueless administration in history. None of these people ever created wealth, they just benefited from other people's. And now they are destroying ours.
The books starts with the fallacy of the baker's window.
Some local hood decides to throw a brick through the baker's store window. As the neighbors are standing around and talking about it later they realize that it is actually a windfall for the glazier, who will make $250 ($2500) from the repair. The glazier will then spend at least part of that money at the butcher's. And the butcher will spend part of his money with the fish monger. So the $250 will actually help all these people. Now the hoodlum looks more like a hero, helping to stimulate the economy.
But Hazlitt points out the fallacy of all this because of a character we dont see: the tailor. See, the baker was about to go buy a suit. But now he has to replace the window instead. So the glazier benefits only from the misfortunate of the tailor, who won't get the money. No wealth has been created in the window breaking, only moved around.
The Obama Administration needs desperately to read and understand this. The cash for clunkers was a great example of this fallacy. The gov't took the money from somewhere. Someone got taxed for it. Even if the money was borrowed (which it was) someone down the road will pay for it in taxes. Here, the car maker is the glazier and everyone else is the tailor. No wealth was created by this boondoggle. Add in the transaction cost of gov't taking money from one person and giving it to another and it is a net loss.
The program won't even save gasoline, as new cars are driven more than old ones.
Joe Biden said it was one of the most succesful programs they had.
So we have the most clueless administration in history. None of these people ever created wealth, they just benefited from other people's. And now they are destroying ours.
