An inconvenient truth. (HT W.E. Heasley)
The idle rich are never really idle; their savings become investment funds for others, and that fuels economc progress. As Milton Friedman pointed out long ago, in a rising tide all ships rise.
Now consider, Paul Krugman’s response – opportunity cost of how government might have better spent those funds if it had confiscatory taxation; snide remark about the belief in “trickle down” economics; and the invoking of a public choice style argument about the wealthy capturing the aparatus of government and undermining democracy. Leave aside the the opportunity cost argument and the public choice style argument are in tension with each other!; but instead consider that the standard Keynesian narrative about the broken link between savings and investment and thus the critique of “trickle down” economics must be argued and not merely asserted. Where do those funds go if not into investments whose return is positive? If not positive, then wouldn’t we simply see the old wisdom about a fool and his money are soon parted being manifested? In other words, if the idle rich were indeed idle, they wouldn’t be rich.
Speaking of Pete, here’s another splendid post from him – this one prompted by a recent NYT essay by Joseph Stiglitz. (I confess to sharing John Papola’s much more critical assessment – revealed in the comments to Pete’s post – of Stiglitz’s essay.)
Writing in today’s Wall Street Journal, University of Chicago economist (and the most recent winner of the Manhattan Institute’s prestigious Hayek Prize), Casey Mulligan, explains that (quoting the essay’s lead) “public policy intended to make layoffs less painful actually made layoffs cheaper and more common.” Here’s his final paragraph:
It’s not just politicians or journalists who do not see the full economic picture. It’s the top economists in the world, from the International Monetary Fund to university professors, who promised that there was no trade-off and that, at this supposedly special time in history, redistribution would create jobs and grow the economy. The stimulus advocates rarely note the kind of thing that Mr. Reece talked about, and they never, ever, mention that redistribution is a subsidy to layoffs.