It might be time to start getting creative to deal with the current economic crisis. In Hazlitt’s classic Economics in One Lesson, he described the concept of the government spending money to stimulate the economy. He claimed that the purchasing power argument, whereby money is funneled through the government and thus spent in the economy, was akin to a thief robbing you and spending your money at restaurants and to buy cars. He says, “But for every job his spending provides, your own spending must provide one less, because you have that much less to spend. When your money is taken by a thief, you get nothing in return. When your money is taken through taxes to support needless bureaucrats, precisely the same situation exists.”
While on the surface Hazlitt sounds completely and totally logical, the concept of stealing money to get the economy going might not be all that far fetched. Hazlitt was writing well before the modern era. He must not have pondered all the consequences of widespread theft, and the numerous benefits to the economy as a whole. Maybe the government should create a new agency that hires thieves (yes, more employment) to break into people’s houses and steal their stuff.
Not only does the thief have money to spend in the economy, but the victims (if that word is even appropriate in this case) will now need to replace the stolen items and thus create more demand in the economy. But wait – what about the concept that the money used to replace goods could have been used to buy new goods instead? First of all, those stolen from probably had too many goods to begin with, and were likely sitting on cash – so the thief actually stirred up demand. Second, the insurance company will compensate for the stolen items anyway.
Yes, the cost of insurance is miniscule compared with the value of the goods. Thus, the actual cost of the theft is spread out over the entire insurance-buying population. And when the insurance companies become insolvent from paying out the increased volume of claims, the government can simply intervene and subsidize the industry.
And where will the extra money come to pay the insurance companies? Well, the government can simply print more money. What about the inflation? No problem, the government can set a ceiling on the price of goods. What about the shortage of goods that comes from the regulation of a price ceiling? Hey, the government now has a stockpile of stolen goods to meet the demand!
Somehow this should work, no? No. It just simply does not.
“Facts are the only antidote to a seductive vision” – Thomas Sowell