I argue that stimulus package doesn't work because it misallocates capital from the sectors that need them to the unproductive sectors. Socialist says government investments in education, health care, and infrastructure are very important as these are all basic to an economy. How can you say these are unproductive!? He says.
How do you counter the argument that health care, education, and infrastructure are very important so government must invest in those to heal the economy?
http://en.wikipedia.org/wiki/Subjective_theory_of_value
Freedom of markets is positively correlated with the degree of evolution in any society...
Don't let him be on the offense in discussions like this. Turn it right back on him. If education, health care and infrastructure are so important, then government MUST not be involved with them. Government can't calculate. Government can't economize. Government can't determine what is most valuable. It will always be more wasteful with scarce resources than the market. As with all monopolies, government causes higher prices and lower quality.
Kenneth:Socialist says government investments in education, health care, and infrastructure are very important as these are all basic to an economy.
And all such investments must be coordinated by the market in order for them to be productive, that is, they must add something to the wealth available without impairing the satisfaction of wants that are considered to be more urgent by consumers. The market coordinates production according to consumer demand. Such coordination is only possible by resorting to economic calculation. Profits signal to entrepreneurs that consumers approve of their action (efficient use of resources) and losses signal to them that consumers disapprove.
Government does not operate by profit and loss so it lacks the above method of calculation. There is no possible method by which the government can utilize those same resources more efficiently even if they all tried very hard. All government spending does is divert capital (scarce resources) from the productive process described above, to the hands of politicians who now arbitrarily, or more accurately, according to their own political considerations, must decide on how to utilize those resources. Whatever amount government spends, the same amount must be subtracted from the private sector. They spend 1 Billion on a highway or whatever, that is 1 Billion less of stuff that that market would have made in order to satisfy consumers. All government spending does is substitute the value judgement of politicians for the value judgement of consumers.
Walter Block has argued that food is much more vital than anything else. Yet no one is demanding that govt take over the food market.
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It's easy to refute an argument if you first misrepresent it. William Keizer
Smiling Dave: Walter Block has argued that food is much more vital than anything else. Yet no one is demanding that govt take over the food market.
You can bet someone would argue for that if starvation became a national problem.
They did back in war time, but food controls literally leave a bad taste in your mouth, so ultimately they have to be abandoned.
The fallacies of intellectual communism, a compilation - On the nature of power
But doesn't your argument only apply to government TAKEOVERS of health care, education, and infrastructure? Stimulus packages only give money to private firms in the chosen sector. So they can still somewhat calculate since they are part of the free market.
Kenneth: But doesn't your argument only apply to government TAKEOVERS of health care, education, and infrastructure? Stimulus packages only give money to private firms in the chosen sector. So they can still somewhat calculate since they are part of the free market.
A bureaucrat giving calculated capital to anybody is exactly what the Calculation Problem argues against, and by no means can that be a part of any free market.
Z.
DD5: All government spending does is divert capital (scarce resources) from the productive process described above, to the hands of politicians who now arbitrarily, or more accurately, according to their own political considerations, must decide on how to utilize those resources. Whatever amount government spends, the same amount must be subtracted from the private sector. They spend 1 Billion on a highway or whatever, that is 1 Billion less of stuff that that market would have made in order to satisfy consumers.
All government spending does is divert capital (scarce resources) from the productive process described above, to the hands of politicians who now arbitrarily, or more accurately, according to their own political considerations, must decide on how to utilize those resources. Whatever amount government spends, the same amount must be subtracted from the private sector. They spend 1 Billion on a highway or whatever, that is 1 Billion less of stuff that that market would have made in order to satisfy consumers.
I agree but it's just hard to convince someone that things like health care and education are not wanted by the consumer.
Kenneth: I agree but it's just hard to convince someone that things like health care and education are not wanted by the consumer.
I have a good feeling that in a free market, there would still be a demand (and a supply) for them