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Bastiat

The Broken Window Fallacy

The “Broken Window” fallacy was exposed by Frederic Bastiat over 150 years ago. It never fails to reappear every time there is a natural disaster. The fallacy is a marker of intellectual IQ. Those who commit the fallacy should not… Read More »The Broken Window Fallacy

Jobs Created are Seen; Jobs Destroyed are Unseen

Bastiat

The utter nonsense about jobs created via government spending is never examined by the media. Whatever government tells the State Media, they willingly print and sometimes even elaborate on. Even when the news is not good, you would never guess it if all you did was read the headlines.

Some comments are in order regarding jobs in general.

Most government jobs are useless.

Government produces no product and virtually no service. In a free market, most of these jobs would not exist because there is no demand for them. The only way that these jobs are created and maintained is via coercion in the form of a tax system. There is no market demand for most of them. The few jobs that do produce a service would be created by the free market and would provide better service at lower cost. (For those who want to argue that certain jobs needed, for example the military, would not be produced by a free market, that can be exempted from this discussion, although there is a case to be made for those as well.)

The claim that government spending can create jobs is spurious.

Government has no money and produces no products. Hence they have no money except what the take from productive citizens. To argue that their spending creates a job is to argue the “broken window fallacy” of Frederic Bastiat. It is the cheap political trick of pointing to “what is seen” and ignoring “what is not seen.” If government creates a new job paying $50,000 that is seen. What is not seen is the $50,000 taken from the productive sector to create that job.

That money would have been plowed back into businesses for hiring or investment or paid out in the form of dividends to shareholders who would have saved it or spent it. If it were saved it would provide capital for entrepreneurs to start or build businesses. If spent it would have supported existing businesses. It would be used in the manner that was consistent with the wishes of the free market. As such, it would raise the well-being of society. Instead, it is confiscated by government and spent as some political hack sees fit, whether his constituents want it or not.

The result is that society has not created any net new jobs. It likely has destroyed jobs that should exist to create jobs that should not exist. That is the best one can say for the nonsense peddled as “jobs created by government spending” or the even more nonsensical “jobs saved by government spending.”

To understand what the costs of government creating jobs , all you have to do is look at your paycheck. The difference between gross and net pay is only a part of that cost. Paul Hollrah discusses these costs:

In an August 9 op-ed column in the Wall Street Journal titled, “Why I’m Not Hiring,” Michael Fleischer, President of Bogen Communications, Inc. of Ramsey, N.J., explains why it is so difficult for today’s employers to begin hiring once again. He tells the story of just one 15-year employee named “Sally.”
According to Fleischer, Sally grosses $59,000 a year, whichRead More »Jobs Created are Seen; Jobs Destroyed are Unseen

Some Interesting Books

One of these days I shall put together a book list. There are so many out there that have influenced me and my thinking that it is difficult to make the time to provide such a list.

Here is one person’s list. It is a reasonable start for those of you interested in exploring such subjects.

Those Revolutionary Books…

by Nicholas Snow

For most of us there is usually a book or two that help shape our beliefs. They are books that have a revolutionary impact on our thinking. For many classical liberals/libertarians, as the popular saying goes, it usually begins with Ayn Rand. And Atlas Shrugged certainly deserves this reputation but it’s certainly not the only book. For many it began with the works of MisesHayekRothbard, and Henry Hazlitt (just to name a few). For myself it was Hazlitt’sEconomics in One Lesson and my own professor, Walter Block’s Defending the Undefendable (certainly Hazlitt’s book comes first because without it I undoubtedly would have interpreted this book very differently. Whether you agree with the radical positions or not this book shows just how far the logic of the one lesson can be taken, this is possibly why Hazlitt himself praised it).

In regards to Economics in One Lesson, I am not alone. In fact, Ayn Rand’s main competition very well may be Hazlitt’s fantastic introduction to economics. The book is revolutionary to so many becauseRead More »Some Interesting Books

Political and Economic Situation Dire

The welfare state has failed. All western welfare states are on the verge of political and economic collapse. All are insolvent and incapable of meeting their obligations. As shown here, the mathematics cannot work without massive defaults.

Political leaders, almost universally, are unwilling to accept this reality. Power has aphrodisiac-like properties. Once attained, more is desired. It is rarely relinquished willingly. Dismantling the welfare state is relinquishing power. It is not likely to happen smoothly or before political and economic failure.

The world is at a dangerous juncture. A confluence of failures has never occurred before other than from world-wide plague, famine or far-reaching wars. Breakdowns in arguably the most civilized societies are going to occur. When they do, war and other apocalyptic outcomes are possible. Confusion and mayhem present opportunities for rogue nations and non nation-states.

The above is a simple description of the state of our world. As people, investors, taxpayers or whatever other roles we play, it is our reality.

How Did We Get Here?

Lord Acton

The common cause in the impending sovereign disasters is the welfare state. Lord Acton pointed out the dangers of power in his universally-recognized quote “Power corrupts; absolute power corrupts absolutely.” This aphorism explains why both written and unwritten constraints on elected officials were considered important.

In order to acquire excessive power, these constraints had to be circumvented. Enter Otto von Bismarck who “invented” the welfare state. This relatively recent concept provided the vehicle for massive government expansion. As Bill Buckler succinctly described it:

… the welfare state is the mechanism which makes government depredations acceptable to the public.

The welfare state was sold as an improvement in citizen conditions. Promises were made that would improve everyone’s circumstances. The welfare state institutionalized what Bastiat warned about:

The State is the great fiction by which everyone seeks to live at the expense of everyone else.

Bastiat’s warning appeared over 150 years ago. It pre-dated Bismarck and provides a nearly perfect description of the modern welfare state.

The welfare state quickly became a Ponzi scheme. Whether that was Bismarck’s original intent is irrelevant. It was abused by the ruling class to buy votes and enhance power. As described Read More »Political and Economic Situation Dire

The Law by Frederic Bastiat

Frederic Bastiat was the most influential economic essayist ever. He died in 1850. His “broken window fallacy” is probably the single most important principle in economics. It anticipated Keynesian economics and vitiated most of it before Keynes was born. Still… Read More »The Law by Frederic Bastiat

The Myth of Government

Image via Wikipedia Image via Wikipedia For the past seven decades, Government formula has been the same. Start a program whenever something seems wrong. Intervene if the economy does not produce the desired results. Repeat again and again, all the… Read More »The Myth of Government

Bastiat, His Life and Times and Lessons for Today

Frédéric Bastiat.
Image via Wikipedia
Louis XIV visiting the  Académie des sciences ...
Image via Wikipedia

Recently I posted a piece by Frederic Bastiat written in 1848. It was from his famous essay “What is Seen and Unseen.”  In that essay he developed an example that is now known as the “Broken Window Fallacy.” Today, much of economics still falls prey to the mistake that Bastiat explained over 150 years ago. Because several have expressed interest in Bastiat, I have included an essay about him from the Mises Institute.

Frederic Bastiat (1801-1850): Between the French and Marginalist Revolutions

By Thomas J. DiLorenzo

CLAUDE FREDERIC BASTIAT was a French economist, legislator, and writer who championed private property, free markets, and limited government. Perhaps the main underlying theme of Bastiat’s writings was that the free market was inherently a source of “economic harmony” among individuals, as long as government was restricted to the function of protecting the lives, liberties, and property of citizens from theft or aggression. To Bastiat, governmental coercion was only legitimate if it served “to guarantee security of person, liberty, and property rights, to cause justice to reign over all.”[1]

Read More »Bastiat, His Life and Times and Lessons for Today