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A Rorschach Test to Distinguish Keynesians from Non-Keynesians

Posted By Don Boudreaux On February 4, 2014 @ 9:16 am In State of Macro | Comments Disabled

Which of the following individuals – Smith or Jones – does more to raise the living standards of millions of middle-class people?

Smith, using only his own funds and funds voluntarily invested in his enterprise, invents a vaccine that inoculates people successfully against cancer, pneumonia, broken bones, acne, heartburn, and erectile dysfunction.  This vaccine, taken only once, lasts a lifetime.  It has no ill side-effects.  It is made from common, everyday ingredients; each dose costs only a fraction of a cent to manufacture.  Selling the vaccine causes Smith’s net worth to rise from $100,000 to $1,000,000,000,000.  Smith, however, cares nothing for material luxuries.  For the rest of his life he spends only $20,000 per year on consumption for himself; he hoards the rest of his fortune in cash in his garage.

Jones, using only his own funds and funds voluntarily invested in his enterprise, invents a vaccine that inoculates people successfully against cancer, pneumonia, broken bones, acne, heartburn, and erectile dysfunction.  This vaccine, taken only once, lasts a lifetime.  It has no ill side-effects.  It is made from a rare mineral found only miles beneath the surface of the earth.  To produce this vaccine requires annually billions of dollars of specialized machinery, supplies, and lots of labor.  Yet despite its high cost, it is so valuable to humanity that Jones’s sale of his vaccine causes his net worth to rise from $100,000 to $1,000,000,000,000.  And Jones loves his material good fortune.  He spends wildly – hundreds of homes, garages full of expensive cars, a private jet for each day of the year, elaborate parties, large warehouses full of clothing, new mattresses and sheets for each and every night of his life, electronic gadgets of every sort; the list of stuff that Jones buys daily is very long indeed.  Timing his pattern of lifetime expenditures perfectly, Jones lives elaborately until the moment of his death so that at that moment he spent the last cent of his $1 trillion dollar fortune.

Each of these people did a great deal to help others.  But which of them – Smith or Jones – did more than the other to help others?

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