Breaking windows

by Russ Roberts on September 6, 2011

in Myths and Fallacies

Alex Tabarrok suggests that Krugman has taken the broken window fallacy to a whole new level. Krugman argues that we want more regulations when we’re in a liquidity trap–it forces firms to invest. Alex responds:

What is interesting about this argument is that Krugman has gone one derivative beyond the broken windows fallacy to create an argument requiring even stronger assumptions, let’s call it the breaking windows fallacy.

Bastiat’s assumption of a one-time, randomly broken window is more likely to be stimulative than an increase in the rate of window breaking. A one-time, window-breaking is a sunk cost that does not affect profit-maximization, at least not according to basic theory. (I say basic theory because once we introduce fixed costs, bankruptcy costs and liquidity constraints a one-time negative shock may cause a firm to shut down even when it would continue to produce without the shock, ala Krugman and Baldwin 1989). Thus a one-time window breaking may cause firms to increase spending. An increase in the rate of window-breaking, however, is a change in the marginal conditions for profit maximization that will cause some firms to exit the industry (reduce output) and thus the net effect on spending is more ambiguous.

Be Sociable, Share!

Comments

comments

68 comments    Share Share    Print    Email

{ 68 comments }

JS September 6, 2011 at 10:26 am

The logic of economic theory has led many to libertarian ethical and political conclusions. Their ideological conception of justice was probably influenced by their understanding of economics, in that ‘reason’ would suggest that human prosperity be linked with ethics that support it. It just doesn’t make sense to advocate and ethical system that causes human impoverishment.

The opposite of the process described above is when people use their emotions and prejudices to establish their ideological attachments without bothering to subject their beliefs to critical examination. Most modern liberals suffer from this. They can’t think beyond their emotions.

Then there is a third type who is fully aware of what they are doing. They emotionally cling to their ideology with full awareness that it can’t be substantiated by any measure of ratiocination, but they use their knowledge not as a form of enlightenment, but as a tool of propaganda, to confuse and decieve.

Paul Krugman is fully aware of the economic fallacies he employs for a living, but his believers as well as the gullible aren’t.

Invisible Backhand September 6, 2011 at 11:24 am

Have you ever kissed a girl?

Dan H September 6, 2011 at 11:30 am

If he answers “no”, are you going to ask him out, IB?

I always thought you may be a little blue (<Methinks should probably know what that means).

But hey, to each his own.

Methinks1776 September 6, 2011 at 2:38 pm

I don’t know about that. I think Backwash is just wondering what it’s like since nothing will touch him with a ten foot pole.

Ameet September 6, 2011 at 2:32 pm

Talk about one of the most irrelevant responses ever to a point made by someone. Way to go!

JS September 6, 2011 at 2:57 pm

I’m good at everything I do, and that means everything. I was a D1 and then semi-pro soccer player in my twenties, but was also smart enough to eventually start a manufacturing/distribution company.

Nobody who knows me in real life knows this aspect about me, at least what apparently amuses you, they don’t know. They work with me, golf with me, but I don’t share these interests with anybody. I haven’t even had a political argument with anyone for over a decade, and don’t vote.

What happened was that my wife has/had some serious health problems that prevented us from having kids. I had more free time, boredom, as a result, which I invested a good portion of it into the study of philosophy and economics. But because those interests weren’t the type that one’s typical friends had, I never had an outlet to formulate, articulate, and share my thoughts, other than on a few websites here and there. Although I’m still working on the concept of ‘sharing’ thoughts, since I’m not that good at receiving the thoughts of others-though in business I listen.

It is an intellectual challenge to make a well reasoned argument. The effort to do so really helps to develop an ability to communicate in business. It’s a tremendous asset in the art of selling. Much of what I do here is practice for the sake of it, although I rush and make lots of writing mistakes.

I get your point though. If I were a girl, I wouldn’t kiss the guy making those posts either.

Invisible Backhand September 6, 2011 at 3:28 pm

It is an intellectual challenge to make a well reasoned argument.

One beyond your abilities, since you rely on ad hominem and reductio ad absurdam.

Also, you could adopt.

JS September 6, 2011 at 3:38 pm

That’s not true. She could have had children, but wasn’t strong enough to raise them.

I have made detailed economic arguments on most subjects, whereas you haven’t. I can debate you from any number of capacities, philosophical or economic, but it’s not that easy when your opponent, like you for example, has no capacity whatsoever.

I can even argue your side better than you can.

Dan H September 6, 2011 at 4:02 pm

JS,

You sound a lot like me.

I ran track on scholarship in college (in addition to the massive academic scholarship I earned). I also played semi-pro football this past year after not having put on pads since the age of 14. I ended up earning the starting QB job.

It’s not as much my talent as it is my mentality. When I want something, I go get it. it’s as simple as that. I don’t care how much work it takes. I don’t wait for anything to be “given” to me. I don’t sit there and “wish” I had as much “talent” as teh next guy.

After my track career ended prematurely due to a numer of personal issues, I found myself with so much free time that i didn’t know what to do with it. So I took to studying philosophy, which complemented my economics background. Once I discovered the power of reason, I went from “neo-con” or “compassionate social conservative” (whatever that is) to a full-fledged libertarian.

I “kissed” my fair share of girls in college, as I’m sure you did. Given that there were good looking guys everywhere (especially when the guys you hang out with are also on the track team), it was always my intellectual side that set me apart. The chicks dig it.

JS September 6, 2011 at 4:38 pm

Dan H,

You must have been a sprinter/decathlete or a field event specialist. Anyone big enough for football, even QB, couldn’t have been a distance runner. I did 3 sports in HS: soccer, track, and basketball but for the next level, it came down to running or soccer. The summer before my senior year I ran too many miles and had a breakdown that took 6-9 months to fully recover from. So it became soccer by default, although it turned out that my gifts were in that sport anyway, and I was able to play at relatively high amateur levels until 40. It’s kind of sad when the legs start to go, but you’re a lot younger and still at it, so I wish you the best of luck. I’m sure that when you can’t play football anymore, you’ll replace it with something else. For me it was golf. I can’t go through life without a sport to frustrate me.

Regards–

Dan H September 6, 2011 at 4:54 pm

I was a decathlete. Touche, JS!

Actually, now that my stress fracture problems seem to be solved and my personal problems are gone, I’m thinking about getting back into it. I wanted to hit 7200 points before I “hung ‘em up”. I’m thinkin about entering some meets next spring, which means I should probably start training yesterday.

JS September 6, 2011 at 5:31 pm

You’ll regret looking back if you don’t. You’ll have ample time for eveything else.

7200, unreal. what the hell are you doing here? Life’s too short.

Dan H September 6, 2011 at 5:47 pm

Just got home from work, and I’m on my way to the gym now!

So it begins… the long road back.

kyle8 September 6, 2011 at 7:53 pm

You are beyond an ass. You stupid tool. Adoption is not all that easy by the way idiot.

Dan J September 7, 2011 at 1:21 am

JS…… Yet one more participant to the site that shows my ignorance and lack of knowledge. Scary to think that I was considered one of the bright one’s from South Detroit suburbs. That locale is a lost cause…… Sigh!!!

House of Cards September 6, 2011 at 1:56 pm

“Most modern liberals suffer from this. They can’t think beyond their emotions.”

Troll

Invisible Backhand September 6, 2011 at 2:08 pm

Don’t call him a troll, they prefer to be called robot-Americans. From the science fiction movies I’ve seen they always learn to understand “love” by the end though.

JS September 6, 2011 at 2:59 pm

You’re a wool in sheep’s clothing.

JS September 6, 2011 at 10:41 am

Off topic, but related to windows, my company sells to the window industry- which has been in state of devastation since the collapse of the housing bubble. To say that we had 10 years of steady ‘stimulus’ into that industry would be an understatement, and now we are experiencing what might be a 10 year correction. Even last year, part of the energy stimulus legislation passed by Congress provided tax credits for people who purchased and installed energy efficient windows. So, the 4th quarter of last year saw a boom in window manufacturing as homeowners bought windows then, instead of now. Now, some are going broke, or are close to it, and some made some capital investments thinking that the demand that they enjoyed last year would be permanent.

The Other Eric September 6, 2011 at 10:58 am

I fear Alex is only half right.

Regulation is good because it requires firms to hire more accountants and managers to track and feed regulatory information– except that the hundreds of professionals hired to do that burn higher salaries and benefits, preventing the hiring of thousands of others.

Regulation is good because it protects people from the extremes of the market– except that it reinforces behavior by firms who leverage ever changing regulations to manipulate markets creating extreme imbalances.

Regulation is good because it’s ‘active’ and shows legislators and officials ‘doing something’ that they can tell voters about– except the story of what those actions really cost is never calculated and explained.

Regulation is good because it keeps people safe– except that there’s no evidence that has ever supported that claim. Ever.

Regulation reduces risk, by shifting the conditions of risk into different contexts. The best analogy I can offer is to say more regulation helps people in the same way that hiding a weapon behind my back makes you safer.

Invisible Backhand September 6, 2011 at 11:04 am

Krugman implicitly assumes that a regulation is like a broken window but as far as costs are concerned a regulation (regardless of its ultimate benefits) is worse, it’s more like an increase in the rate of window-breaking.

Actually, complying with the ozone regulation is a one time cost, but Alex wishes to make up a set of premises that support his assertion instead.

Dan H September 6, 2011 at 11:26 am

I’m not sure about that. I’ve never run any sort of operation that had to comply with ozone standards (which begs the question, “have you?”). Though whether it is a one-time cost or recurring cost, it’s a cost that should not exist at all, and once incurred, it is passed directly on to you and me.

Invisible Backhand September 6, 2011 at 2:15 pm

I’ve read the links, (which begs the question, “have you?”)

When you require industries to meet tighter ozone standards, on the other hand, you save thousands of people’s lives every year. But the point Mr Krugman is arguing is more crucial for the current economic debate. He’s saying that under current conditions, ie until we enter a sustained recovery and companies start spending down their cash reserves, requiring businesses to spend more money doesn’t cost jobs; it creates them. I’d be curious to see a conservative response that starts by acknowledging that businesses are not in fact investing their profits and cannot do so unless something nudges them, and then explains what’s wrong with Mr Krugman’s argument.

http://www.economist.com/blogs/democracyinamerica/2011/09/ozone-regulations

But hey, if they want to be libertarians and keep all their ozone on their property, I’ll help build an airtight dome over their facility.

Methinks1776 September 6, 2011 at 2:40 pm

Your ignorance would be breathtaking if one weren’t keenly aware that your IQ is lower than your shoe size. At that point, one begins to marvel at your ability to use the computer keyboard.

Invisible Backhand September 6, 2011 at 3:20 pm

I don’t use a keyboard, I use my mind powers. I’ve tried controlling your mind, but you give me nothing to work with.

Dan H September 6, 2011 at 3:25 pm

Had Methinks been your mother, then you might have something to work with.

Then again, if Methinks were your mother, she wouldn’t let you live in her basement past the age of 30.

Methinks1776 September 6, 2011 at 3:34 pm

I don’t use a keyboard, I use my mind powers.

That explains your feeble drivel.

Ameet September 6, 2011 at 2:45 pm

With all due respect IB, what if the regulations can’t be met with current technology? What then? Are they a smart idea?

http://reason.com/blog/2011/09/02/obama-to-enviros-on-ozone-ill

The part I found most relevant:

Finally, the primary standards may be impossible to attain. The Clean Air Scientific Advisory Committee (CASAC) explained that “as levels for ozone standards move closer to ‘background’ levels, new issues may arise with implementation.” In many areas, background levels of ozone approach or exceed the proposed standard, placing those areas in permanent non-attainment, with all the economic consequences.

Hey, if you feel that government bureaucrats are better at keeping the environment safe, and that they would never, ever propose something stupid, then I understand your position.

Another thing the Economist fails to consider in its blog is this very simple notion called Return on Investment. Utilities are heavily regulated, so their ROIs are lower. To add costs to their bottom line with no real change in their profits means that investments like these, if the technology even exists in a few years, will have a zero to negative ROI. What rational company would pursue such a thing?

Ameet September 6, 2011 at 3:29 pm

Typo error: for my last paragraph, I meant no real change in revenues, not profits. If costs go up thanks to regulation, and revenues do not, then the profit margin is lower, the ROI for the individual project is negative, and the overall ROA (return on assets) for the utility goes down.

Nevertheless, the point remains the same: is it just to force someone to make an investment where they have no realistic prospect of making a return on it? That would be wasted capital, and quite a travesty.

Invisible Backhand September 6, 2011 at 3:35 pm

Glad to see your reading some links, but I would take The Economist over Reason, (aren’t they still climate deniers? Haven’t been there in a while), Bastiat Institute, Cato, Mises etc.

“Utilities are heavily regulated, so their ROIs are lower.”

If they’re heavily regulated, they have a guaranteed profit since their rates are set by a public utility commission. If they are unregulated, they California 2001 and Enron. So again, I have to choose between a guy on a blog who is unclear on his concepts, or The Economist.

Ameet September 7, 2011 at 9:58 am

IB, guaranteed profits are meaningless if they are less than your opportunity cost of deploying capital elsewhere. If I have an ROA of 8%, and then can’t increase my revenues because regulations hold my prices the same, but increase my costs because of government ozone regulations, my ROA goes down. At some point, it becomes imprudent for me to run (or own) a utility business.

Let’s look at an energy company in my area, Pepco. ROA there was less than 1% in 2010. ROE was maybe 3.5% or so (source Google Finance). Long term treasuries rates (not the best investment) are between 2% for the 10 years, and 3.26% for the 30 years. This hardly looks like a big enough premium to justify the regulatory risk of depressed margins due to further EPA regulations. (And what if treasury rates increase, but Pepco’s returns don’t due to regulations? Then they’ll definitely be earning a negative return when considering opportunity cost.)

I am left to believe that either you do not understand opportunity cost and rates of return, or you think that guaranteed profits mean that someone will make an investment, no matter what.

JS September 6, 2011 at 3:47 pm

When you say that you’ll “help build an airtight dome..”, does that mean you’ll apply for the grant? It’s obvious you don’t have a pot to piss in.

JS September 6, 2011 at 4:53 pm

Providing ‘links’ only shows that you can’t make your own argument. The Economist is a b.s. Keynesian publication.

First, it is an error to suggest that ‘businesses’ are cash rich, but assuming some are, if the economy doesn’t improve, they will increase their dividend payments to their owners.

If you make profits in whatever your specific line of work is, how would you like some authority to force you to spend it creating jobs that will not provide an additional return for you? How would you like all your wealth taken from you that will become profits for other companies, or people in other fields of work? How would you explain that to the woman who suffers your kisses?

And give me a break about this ‘saving lives’ crap. Your problem is estrogen, that is, too much of it.

JS September 6, 2011 at 5:22 pm

By the way, Invisible backhand, I just refuted your post with my own thought, without the help of some leading publication. It is simple, to the point and explodes your argument using economic reasoning. Your arrogant post demanded a response to your link, and I gave you one from the perspective of the companies who are being robbed by the regulations.

Now I’ll give you some reasoning from the perspective of society, or from how the regulations affect the standard of living of the consumers. The price increases that the regs cause will cost consumers more than the benefits accrued to the workers. Increased prices in one area cause a reduction in consumption in other areas, causing layoffs in unrelated or unpredictable industries.

Keep in mind that the pollution control devices are not related in any feasible manner to consumer goods of the first order, and any subsequent order in the supply chain. They are merely and totally ‘a tax’ on producer goods that translates into a tax on later consumer goods. You’re advocating a policy that takes from one pocket and puts in another.( Nothing of value is being made, and if it were valued, that would imply that there is a demand for it, and if there were a demand for it, then capital would voluntarily be invested in it and labor would be hired to make it.)

If your goal is to help out the unemployed, and you are not queezy about using political compulsion, which you don’t seem to be,why don’t you just advocate taking the cash from the companies under discussion and giving it all to the unemployed. This way, all of it would be available to pay labor with, without most of it going to upper management and the profits of the enterprises that get the work. That way, you don’t have to worry about those rich managers/owners buying private jets and going bankrupt.

Society would even be better off if unemployment benefits were extended than by making products that nobody, under conditions of freedom, would ever buy or demand to be bought by those who supplied them.

Ameet September 6, 2011 at 10:08 pm

Agreed JS. Also, I’m not certain that Mr. IB looked at the actual EPA pdf on that ozone regulation policy. If he had, and if he was someone who actually invested money, he would have been struck by how the cost/benefit analysis most of the time was in the red. Of course, I’m willing to bet he would think that assessment pessimistic, but you can’t invest based on hope.

A more realistic person would have looked at the numbers and said: 1) My costs could be anywhere from $19-25B a year in 2020; 2) My benefits could be anywhere from $13-$37B a year, but a good deal of that is not going to be a ‘cash’ benefit; 3) My benefits are relatively certain; 4) My costs may not be nearly so certain, since EPA assumes, and quote “supplement to the RIA assumes that the proposed standards can be achieved throughout the U.S. using a mixture of known air pollution control technologies and unknown, future technologies; and 5) we know that humans are terrible at forecasting, so it is likely those cost estimates are too low, leading to; 6) the cost/benefit analysis is likely too optimistic and would likely result in no societal benefit.

Of course, I’ve also ignored the potential cost vis a vis jobs lost from the regulation. But I thought thinking the policy analysis through as an investor sufficient to be skeptical of the calculations, and hence whether the policy would even be good empirically. And if it is not good empirically, it should not be pushed, period.

N.B. I like the nuances in your arguments. A bit more sophisticated in writing style than mine.

Andrew_M_Garland September 6, 2011 at 6:46 pm

To Invisible Backhand, you quote:
“Mr Krugman is is saying that under current conditions, until we enter a sustained recovery and companies start spending down their cash reserves, requiring businesses to spend more money doesn’t cost jobs; it creates them.”

So, what do you and Krugman think of this plan? Banks are sitting on large reserves. Under these conditions, until banks start lending on their own, I will take the money by force (under appropriate legislation) and spend it, thus creating jobs. No need to pay it back. The loss of money to the banks is not material. The ensuing explosion of prosperity will make everyone better off.

Dan J September 7, 2011 at 1:24 am

Unless something nudges them….. As always….. Forced participation…….
How about removing the thousands and thousand of asinine regulations and reducing the tax code to 5 pages?
Done!

Mattheus von Guttenberg September 6, 2011 at 11:24 am

It’s the same way that Hoppe argues that sporadic crime has no effect on time preference, but regular taxation has a significant effect on time preference (the ratio of consumption versus investment).

LS September 6, 2011 at 12:27 pm

Dan H – The cost of a regulation is not always passed directly onto you and me. If the market for the item that operation produces is fairly unconcentrated, which is often the case with manufacturers – the brunt-bearers of many regulations, then those costs are almost always absorbed by the firm. This is even more true for those industry sectors that face competition from foreign markets.

This is not to say I am a proponent of increased regulation, but simply to say that this is often the reason used to stifle regulation and while compelling, is not always accurate.

Dan H September 6, 2011 at 12:43 pm

“then those costs are almost always absorbed by the firm”

… which are then passed on to the consumer in the form of higher prices, no?

LS September 6, 2011 at 1:11 pm

No – because these industries are unconcentrated (i.e. many firms with small market shares), if one firm raises its prices to account for these costs, then it quickly loses its consumer base.

“Costs… absorbed by the firm” means that newly regulated firms must assume all compliance costs within their operating finances. What this can translate to is a reduction in jobs, less investment in capital, and often less production overall.

Seth September 6, 2011 at 1:41 pm

And if the new costs make some marginal firms unprofitable and they discontinue operations, what happens to supply, demand and price?

vikingvista September 6, 2011 at 1:52 pm

Would you say that discontinuing operations is a cost to the firms owners?

The important point is that both trading parties pay some of the cost of taxes or regulations (and they in turn pass some of those costs on to others, and the costs diffuse locally and unequally).

It is as mistaken to believe all costs are passed on to consumers as it is to believe a firm shoulders the full burden of the taxes and regulations imposed upon it.

Darren September 6, 2011 at 2:06 pm

Especially, if there are few firms competing to begin with. Start with 12 firms. A new regulation causes 1 firm to go out of business. A little later another regulation causes another firm to go out of business. Eventually, you have only a few first left. In general, the fewer firms you have competing, the less competition, though this is certainly not linear. Just IMHO. Look at the automobile industry. I can’t help but wonder how much regulation had to do with the decrease in the number of automobile companies and the increase in barriers to new companies entering and competing.

Seth September 6, 2011 at 2:27 pm

vikingvista – I agree. Also, discontinuing operations is a cost both to the owners and its customers. The owners giving up the npv of the profit stream sans the regulation, the customers giving up the npv of the difference in value to them of their preferred option less their less preferred option.

vikingvista September 6, 2011 at 2:32 pm

Seth–Agreed.

Methinks1776 September 6, 2011 at 2:45 pm

LS,

that newly regulated firms must assume all compliance costs within their operating finances. What this can translate to is a reduction in jobs, less investment in capital, and often less production overall.

You’re almost there. Firms will either produce less or not at all – often driven out of business by rising compliance costs. However, you’re wrong that this does not represent a cost to the consumer.

If nothing else, driving companies out of business via regulation reduces competition, which means prices will be higher than they otherwise would be. It also means that there are fewer products coming to market than there otherwise would be. This is the unseen cost of regulation. That which we were prevented from having the chance to consume.

LS September 6, 2011 at 6:05 pm

I agree with you Methinks – there certainly are plenty of indirect costs to consumers and the economy as a result of regulations.

However, it is rare that a regulation causes enough businesses to close that the market share of each firm in that industry is drastically altered. That is, how many firms out of 100 would have to close in order for the remaining firms not to compete on price? If 5 firms out of 100 closes (a very conservative rate), there is still plenty of competition among those other 95 firms to compete on price.

Andrew_M_Garland September 6, 2011 at 7:04 pm

To LS,

Competition is an equilibrium between companies and investment in the business (the seen) and companies and investment not yet in the business (the unseen).

Competition is not merely a desire, it is enabled by investment in more efficient machines and methods.

After killing a few businesses with regulation, and raising costs for everyone, then all prices to customers will rise. There will be less desire to enter this business, less investment to compete by lowering costs, and a recalculation of the higher profits needed from a business which is subject to active and destructive regulation.

There is also the cost of contributing more to the politicians who have threatened the businesses, to buy them off.

Costs to the consumer will go up more than the narrow costs of meeting the regulation. There is a deadweight loss. The regulation had better be quite valuable.

Dan J September 7, 2011 at 1:29 am

Firms also merge to to create larger profits on lesser profit margins, but they do not necessarily reduce prices as the regulations have reduced their capacity to do so.

kyle8 September 6, 2011 at 7:57 pm

That is very simplistic. if they cannot pass the price on to the consumer then they will have less dividends, slower growth, and or less hiring and lower wages. All of those things negatively effect the economy as a whole. So even though the regulation might not cause an increase in the price of widgit A, it still harms everyone.

Investors, wage earners, everyone.

Dan J September 7, 2011 at 1:35 am

Right or wrong, the requirement of catalytic convertors is a costly regulation that has added to price of a vehicle, as are the many other one’s. While, in some cases, the price may have not increased, options can be reduced or quality reduced. Take GM and their New Malibu. The stronger and more safer steel is being removed from roof and hood along with the spars tire to attempt to meet govt regulations of higher gas mileage. Lowered quality and less options are available. Cost to consumer.

Invisible Backhand September 6, 2011 at 10:42 pm

Only in a perfect monopoly.

Speedmaster September 6, 2011 at 12:31 pm

>> “Paul Krugman argues that the broken windows fallacy is not a fallacy in a liquidity trap:”

This guy really is like a broken record. ;-)

I’ll say it again, I believe that Krugman long-ago ceased to be a legitimate economist and has instead become a loud Leftist political operative.

Chucklehead September 6, 2011 at 12:36 pm

“And now you can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.”
The most likely result is they would move to locations where these regulations do not apply, like overseas. You can plot the elimination of chlorinated solvents in the US with the decline of U S electronic manufacturing.
And yes, it is a ongoing cost.

Darren September 6, 2011 at 1:44 pm

Exactly what is “idle cash”? I find it hard to believe it’s not being used for *something*. Is it sitting someplace earning interest? Why would that ‘somplace’ pay interest just to leave it sit idle?

Economiser September 6, 2011 at 2:06 pm

There is no such thing as “idle cash.” It’s a Keynesian construct to make the government’s actions sound productive instead of confiscatory and destructive.

Methinks1776 September 6, 2011 at 2:54 pm

If I keep it in my vault at home, it will not pay interest. However, it is not idle either. I obviously have it there because I am using it to ensure against things like restrictions on withdrawals if I fear a bank run.

Economiser September 6, 2011 at 3:13 pm

There’s also an unnecessary distinction here between cash and other forms of resources. Everyone has “idle resources.”

I have a bowling ball sitting in my closet. It’s been an “idle resource” for several years now. It may be idle indefinitely. I could go on eBay and exchange that idle bowling ball for some US dollars and stick those dollars in my closet. Same difference. Or I could take those dollars and buy T-bills. In any case, I’m doing what I choose to do with the resource. The government has no right to encourage me to use my resources differently. They also have no ability to get me to use my resources in a more productive manner.

Methinks1776 September 6, 2011 at 3:38 pm

Good point.

Chucklehead September 6, 2011 at 7:47 pm

hollow out your bowling balls and use it to hide your idle cash. Now your balls are no longer idle.

vikingvista September 7, 2011 at 7:40 pm

I know when mine are idle, because they turn blue.

SaulOhio September 6, 2011 at 1:26 pm

When arguing with Keynesians (and other statists), don’t you sometimes feel like King Arthur near the end of his battle with the Black Knight? I’m talking about the Monty Python version.

“Come back! I’l gnaw your legs off!”

Dan H September 6, 2011 at 2:16 pm

LMAO… so true. I hate to talk politics/economics/philosophy with Keynesians/progressives at parties, because most of my idealogical opponents that are my age (24) are not well versed in politics/economics/philosophy (not to say that I am some sort of expert, but putting humility aside for a second, I am lightyears ahead of many my age).

“Oh, oh, I see, running away then. You yellow bastard! Come back here and take what’s coming to you. I’ll bite your legs off!”

JS September 6, 2011 at 3:10 pm

You need some one liners.

“If I were you with your prospects, I’d be a socialist too.”

“If I had your face, I’d be for equality too.”

‘You look like socialism would help you”

Dan H September 6, 2011 at 3:19 pm

Very nice!

OldHoya September 6, 2011 at 1:55 pm

The only obstacle to economic paradise is utility. If only companies, investors and consumers could be made to want what Krugman wants them to want instead of relying on petty, unenlightened market-contaminated disparate values, then broken window expenditures with Vogon levels of hyper-regulation would not be merely ameliorative but wealth itself.

PrometheeFeu September 6, 2011 at 3:28 pm

I very much enjoyed the 3rd commenter down on Krugman’s post:

“THANK-YOU Prof.

We are not going to let this rest. Marches are being organized. I am getting a big placard saying “Obama puts texas votes ahead of childrens lungs” or something to that effect.
PLEASE stay on this. Its absolutely disgusting. We in the green industries are LIVID!”

Pay attention to the last sentence. Yes. I am quite sure that the people in the “green” industry who could make millions from such regulation would really want that regulation to pass. No doubt at all in my mind that is true. Being in the software industry, I am livid that the government does not put in place standards to force consumers to purchase my product.

Previous post:

Next post: