Quote of the Week

"Never doubt that a small group of concerned citizens can change the world. Indeed it's the only thing that ever has."

- Margaret Mead

Milton Friedman takes on Donahue

Enjoy this short two and a half minute video of Milton Friedman on the Donahue show explaining the virtues of Greed.

Rand, Paterson, and Lane

"This Women's History Month, on the sixty-third anniversary of their monumental triple achievement, the Cato Institute pays homage to three women without whom it would not exist."  In an artilcle entitled Three Women Who Launched a Movement, CATO discusses Isabel Paterson's The God of the Machine, Rose Lane's The Discovery of Freedom, and Ayn Rand's The Fountainhead and (later) Atlas Shrugged, all published in 1943.

In a time of great political and economic turmoil, when most people assumed that socialism was the wave of the future, and almost unavoidable, these three women presented the ideas of individualism, capitalism, and the virtue of free markets is such an understandable and persuasive way, that they effected a great intellectual change in American society.  This article got me thinking, we could sure use another Ayn Rand right about now.

Quote of the Week

“You need only reflect that one of the best ways to get yourself a reputation as a dangerous citizen these days is to go about repeating the very phrases which our founding fathers used in their struggle for independence”

Charles Austin Beard

Less Than Nothing

New article on FEE discussing the pressing question, what should the Governement do to stimulate the economy.  Sheldon Richman thinks that absolutely nothing is too much, the better answer is Less Than Nothing.

The Fallacy of the Short Run

Another great article on FEE entitled Not So Fast!: The Fallacy of the Short Run, by William Anderson. In this article, the author discusses, in greater detail, the problems with economic shortsightedness. In the article, he also quotes from Lawrence Reed’s 7 Fallacies of Economics.

"Some actions seem beneficial in the short run but produce disaster in the long run: drinking excessively, driving fast, spending blindly, and printing money, to name a few. To quote the venerable Henry Hazlitt again, “The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences.”

"Politicians seeking to win the next election frequently support policies which generate short- run benefits at the expense of future costs. It is a shame that they sometimes carry the endorsement of economists who should know better.

"The good economist does not suffer from tunnel vision or shortsightedness. The time span he considers is long and elastic, not short and fixed."

We've been vandalized!

Henry Hazlitt begins his book, Economics in One Lesson, with a simple illustrative story. The story involves an act of vandalism. Some street punk has thrown a brick through the window of a local baker. Townsfolk gather round, as townsfolk often will, and they start talking, as they often do. At first, the folks are angry with the unknown vandal, and feel bad for the baker. However, as they keep talking, they decide that the act of vandalism is actually a benefit to the community. The baker must now pay the glazier to replace the glass, the cost will be a few hundred dollars. Then, the glazier will have more money, and he will spend that in the community, maybe even hire a new employee with the increased business. That money, in turn will be spent somewhere else, and so on, and so on throughout the community. Wonderful!

But, what about the baker? Maybe he had planned to buy a new suit with that $200.00. But, now he must pay for a new window, and buy a new suit. Or, maybe he will not be able to buy the suit at all. If so, then the tailor will not be paid. Either way, the baker is damaged because he has lost the ability to spend his money as he will, because of the vandal's actions. And, truly, the community is no better off in the long run if the glazier gets paid rather than the tailor.

The shortsightedness of the townsfolk's response to the vandalism is the root problem of all bad economic theory. From a family's poor economic choices to a big government trillion dollar inflate and stimulate plan, the problem is the inability to see beyond the "short run."  The long term effects of these decisions, and the potential unintended consequences, are never considered. And I think more importantly, the long term effects of economic meddling cannot be anticipated. So, when we are told that an act of vandalism, or an act of unprecedented borrowing, will provide a quick fix to the economy, we should stop and think. What about the long term?