Is it safe to say, that govs mostly are redistributing and/or destroying wealth?
(english is not my native language, sorry for grammar.)
It is true. A new bridge or motorway can help economic growth.
Only true if it's done in the free market. When the government uses production as a means of increasing employment, nothing comes of it because it isn't supposed to be built in the first place. There are all sorts of fake jobs to be created as a way of redistributing wealth.
"I don't have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It's like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GDP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much." - Warren Buffett
I believe the great Henry Hazlitt in his book "Economics in One Lesson" uses this exact example about the bridge being built by government versus by the entrepreneur.
A bridge is built. If it is built to meet an insistent public demand, if it solves a traffic problem or a transportation problem otherwise insoluble, if, in short, it is even more necessary than the things for which the taxpayers would have spent their money if it had not been taxed away from them, there can be no objection. But a bridge built primarily "to provide employment" is a different kind of bridge. When providing employment becomes the end, need becomes a subordinate consideration. "Projects" have to be invented. Instead of thinking only where bridges must be built, the government spenders begin to ask themselves where bridges can be built. Can they think of plausible reasons why an additional bridge should connect Easton and Weston? It soon becomes absolutely essential. Those who doubt the necessity are dismissed as obstructionists and reactionaries. Two arguments are put forward for the bridge, one of which is mainly heard before it is built, the other of which is mainly heard after it has been completed. The first argument is that it will provide employment. It will provide, say, 500 jobs for a year. The implication is that these are jobs that would not otherwise have come into existence. This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $1,000,000 the taxpayers will lose $i,ooo,ooo. They will have that much taken away from them which they would otherwise have spent on the things they needed most. Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, radio technicians, clothing workers, farmers. But then we come to the second argument. The bridge exists. It is, let us suppose, a beautiful and not an ugly bridge. It has come into being through the magic of government spending. Where would it have been if the obstructionists and the reactionaries had had their way? There would have been no bridge. The country would have been just that much poorer. Here again the government spenders have the better of the argument with all those who cannot see beyond the immediate range of their physical eyes. They can see the bridge. But if they have taught themselves to look for indirect as well as direct consequences they can once more see in the eye of imagination the possibilities that have never been allowed to come into existence. They can see the unbuilt homes, the unmade cars and radios, the unmade dresses and coats, perhaps the unsold and ungrown foodstuffs. To see these uncreated things requires a kind of imagination that not many people have. We can think of these non-existent objects once, perhaps, but we cannot keep them before our minds as we can the bridge that we pass every working day. What has happened is merely that one thing has been created instead of others.
A bridge is built. If it is built to meet an insistent public demand, if it solves a traffic problem or a transportation problem otherwise insoluble, if, in short, it is even more necessary than the things for which the taxpayers would have spent their money if it had not been taxed away from them, there can be no objection. But a bridge built primarily "to provide employment" is a different kind of bridge. When providing employment becomes the end, need becomes a subordinate consideration. "Projects" have to be invented. Instead of thinking only where bridges must be built, the government spenders begin to ask themselves where bridges can be built. Can they think of plausible reasons why an additional bridge should connect Easton and Weston? It soon becomes absolutely essential. Those who doubt the necessity are dismissed as obstructionists and reactionaries.
Two arguments are put forward for the bridge, one of which is mainly heard before it is built, the other of which is mainly heard after it has been completed. The first argument is that it will provide employment. It will provide, say, 500 jobs for a year. The implication is that these are jobs that would not otherwise have come into existence. This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $1,000,000 the taxpayers will lose $i,ooo,ooo. They will have that much taken away from them which they would otherwise have spent on the things they needed most.
Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, radio technicians, clothing workers, farmers.
But then we come to the second argument. The bridge exists. It is, let us suppose, a beautiful and not an ugly bridge. It has come into being through the magic of government spending. Where would it have been if the obstructionists and the reactionaries had had their way? There would have been no bridge. The country would have been just that much poorer.
Here again the government spenders have the better of the argument with all those who cannot see beyond the immediate range of their physical eyes. They can see the bridge. But if they have taught themselves to look for indirect as well as direct consequences they can once more see in the eye of imagination the possibilities that have never been allowed to come into existence. They can see the unbuilt homes, the unmade cars and radios, the unmade dresses and coats, perhaps the unsold and ungrown foodstuffs. To see these uncreated things requires a kind of imagination that not many people have. We can think of these non-existent objects once, perhaps, but we cannot keep them before our minds as we can the bridge that we pass every working day. What has happened is merely that one thing has been created instead of others.
My Blog: http://www.anarchico.net/
Production is 'anarchistic' - Ludwig von Mises
Retention requirements? Is he talking about reserve requirements? Doesn't that inhibit money supply growth? Because that's basically what he's talking about, expansion of the money supply to create wealth.
To me this kind of sounds like saying government can cut taxes to create wealth. Yeah . . . but they put the taxes there, didn't they?
AdrianHealey,
I am a new student of the Austrian School. I am reading a lot and learning and asking you guys on here these questions is very helpful because there are a lot of well read Austrians. I am doing this to learn. Thank you for the book references. I will say despite being only a novice in Austrian theory, I have done pretty well schooling dumb statists thus far. I just have lots of learning to do.
Thanks a lot, yall I appreciate your help and insights.
Hold on everyone weigh in on Captain Keynsian's newest whopper:
when the number of dollars scales evenly with the amount of goods produced via those dollars, the value of the dollar stays static.
We live in a world in which money bids up prices relative to each other, not mechanistically, instanteneously, and proportionally. If money was to affect all goods the same, at the same time, and proportionally then we'd call money neutral, but money is not neutral. Money has real effects on the real economy.
could you expound on that?
wealth is anything with market value, insofar as the market values it. that includes fiat currency. period. when the number of dollars scales evenly with the amount of goods produced via those dollars, the value of the dollar stays static. the economy *grows*.I don't see what any of this has to do with the notion of the government creating wealth. But just taking this by itself, it still isn't really saying much. It sounds like all he's saying is that if the amount of goods increases and there is also a proportional increase in the amount of dollars, then prices stay the same. I say, so the hell what? He's not doing anything to explain anything. He says that and then jumps right into "the economy grows"...as if it were any sort of explanation for the growth.
wealth is anything with market value, insofar as the market values it. that includes fiat currency. period. when the number of dollars scales evenly with the amount of goods produced via those dollars, the value of the dollar stays static. the economy *grows*.
@sam29
what was your resonse to the keynesian on the topic on wealth?
Underpants gnomes can and do create wealth!
@Isaac
Basically that which has been said in some of this discussion: I said that wealth is not paper, that it is owning stuff.
But what of his insistance that we don't know the difference between money entered in the computer and paper money in circulation?
That's exactly the problem isn't it? has he switched sides in the debate?
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring