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Tranquilizing the Stimulators

Posted By Don Boudreaux On January 10, 2009 @ 7:22 am In Energy,Myths and Fallacies,Stimulus,Taxes | Comments Disabled

The Competitive Enterprise Institute [1]‘s Ryan Young and Drew Tidwell understand that there ain’t no such thing as a free stimulus.  Here’s a great letter by Ryan and Drew in the current issue of Time.  (You can find their letter on line by clicking here [2] and scrolling down a bit.)  Oh, by the way: Ryan is working toward a graduate degree in Economics at GMU.

Kinsley’s latest missive in time falls prey to one of the oldest traps
in economics–Frédéric Bastiat’s broken-window fallacy. Just as a
broken window creates work for the glazier at the expense of the window
owner, money that Kinsley hopes to inject into the economy must first
be taken out of it. Add in collection costs and the usual political
malfeasance, and we have a net loss to the economy. There’s more:
Kinsley argues that last summer’s high oil prices were essentially a
tax on consumers; the money just went to oil companies instead of the
government. But he forgets that oil companies do not have control over
their prices. If they did, then why would oil prices ever drop?
Kinsley’s logic does not follow.

Ryan Young and Drew Tidwell,
Competitive Enterprise Institute, WASHINGTON

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