The Homa Files

158 years ago, the  pioneering French economist Frederic Bastiat, wrote about the “broken window fallacy.”

It goes like this: Most people agree that when someone breaks a store window, it’s a tragedy for the shopkeeper. But many also believe the overall economy actually benefits, because the shopkeeper now must buy a new window, a kind of “stimulus.”

This logic, of course, makes no sense.

Yet it’s the basic idea behind all government stimulus plans. The money for the window comes out of the shopkeeper’s pocket. Instead of carrying more stock in his store, or hiring a clerk, he must spend his money instead on a window. So the “stimulus” is really zero — or negative.

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Excerpted from IBD, “The Cost Of Green”, December 03, 2008
http://www.ibdeditorials.com/IBDArticles.aspx?id=313199997499579

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Ken’s Take: Also keep in mind that the government is playing with OTM — “other people’s money” — your’s, if you’re one of the dwindling number of taxpayers.

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This entry was posted on December 5, 2008 at 7:45 am and is filed under Environment - Green, Government & Politics, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.