Larry Summers, former director of President Obama’s economic council and a former head of the World Bank, thinks Japan's economy will benefit from its destruction (Interview Here).
There are three types of people that accept this idea of destruction-as-stimulus: the insane, evil doers, and the publicly educated/indoctrinated. Most of us fall into this last group as we were probably taught the greatest example of this fallacy, that World War II ended the great depression. This is not the case. If you are shocked by that statement, a few minutes in a Google search will show that the depression ended after WW2, when federal spending was cut, regulations and price controls were lifted, resources were allocated into producing consumer goods, and people were allowed to keep more of their money. It only takes an application of common sense to understand that wealth is not being created in wars or natural disasters but destroyed...OBVIOUSLY! (More on WW2 economy (Podcast)
On a side note to the statistically minded, GDP only shows new growth, but does not account for what was lost. In Japan's case, the whole country could be completely destroyed, but if they manage to produce a simple crop, GDP will show a positive gain. GDP also includes government spending, which is not growth at all, just a redistribution of wealth that was taxed out of the private sector.
These ideas are best illustrated in Frederick Bastiat's paper, "That Which is Seen and That Which is Unseen" in the parable of the Broken Window. (See Video)
An even simpler illustration: Imagine you are stranded in an extreme environment indefinitely. Even though you are hungry, you understand that exposure will kill you faster than your lack of food. Most of your time and energy is spent building a permanent shelter, only gathering enough food to keep you alive. After weeks of hard work your shelter is finished, you now begin to focus on gathering more substantial food and plan to eventually move on to developing more complex machines to improve your life. One day you return to your home after a successful day of hunting and you find your shelter has been destroyed by a mudslide (or by congress). Would you think to yourself, "Oh yeah, job security!"? Of course not, because the purpose of working is to improve your life and to acquire more useful products so you don't have to work as hard.
So with this myth busted, why do "expert economists" like Larry Summers and Paul Krugman of the New York Times continue to propagate this delusional fallacy? These individuals fall into the second category of "evil doers". When economic or natural disasters occur or when wars are rocking, government has an excuse to redistribute wealth (resources not money) to their corporate/union friends under the guise of public services. Many times conservatives inaccurately describe this type of redistribution as "socialism", while liberals and progressives inaccurately describe it as "capitalism". (hmm...interesting how these supposed opposites are so similar in outcome). While left and right argue over the details of what to call it, everyone is ripped off on a massive scale. On a similar note, our monetary policy is designed to support this scam. (See Video on scam)
This is not socialism or capitalism. The most accurate description of this economic policy is, "Interventionism", which is by design, beneficial to the power elite at the expense of the industrious.
From now on, when you watch destruction like this,
http://www.youtube.com/watch?v=e-A0NDsPcZY&feature=player_embedded
http://www.facebook.com/video/video.php?v=1605260179420
Pay attention to the talking heads. You'll be surprised and sickened by what is said by the so called experts.
There are three types of people that accept this idea of destruction-as-stimulus: the insane, evil doers, and the publicly educated/indoctrinated. Most of us fall into this last group as we were probably taught the greatest example of this fallacy, that World War II ended the great depression. This is not the case. If you are shocked by that statement, a few minutes in a Google search will show that the depression ended after WW2, when federal spending was cut, regulations and price controls were lifted, resources were allocated into producing consumer goods, and people were allowed to keep more of their money. It only takes an application of common sense to understand that wealth is not being created in wars or natural disasters but destroyed...OBVIOUSLY! (More on WW2 economy (Podcast)
On a side note to the statistically minded, GDP only shows new growth, but does not account for what was lost. In Japan's case, the whole country could be completely destroyed, but if they manage to produce a simple crop, GDP will show a positive gain. GDP also includes government spending, which is not growth at all, just a redistribution of wealth that was taxed out of the private sector.
These ideas are best illustrated in Frederick Bastiat's paper, "That Which is Seen and That Which is Unseen" in the parable of the Broken Window. (See Video)
An even simpler illustration: Imagine you are stranded in an extreme environment indefinitely. Even though you are hungry, you understand that exposure will kill you faster than your lack of food. Most of your time and energy is spent building a permanent shelter, only gathering enough food to keep you alive. After weeks of hard work your shelter is finished, you now begin to focus on gathering more substantial food and plan to eventually move on to developing more complex machines to improve your life. One day you return to your home after a successful day of hunting and you find your shelter has been destroyed by a mudslide (or by congress). Would you think to yourself, "Oh yeah, job security!"? Of course not, because the purpose of working is to improve your life and to acquire more useful products so you don't have to work as hard.
So with this myth busted, why do "expert economists" like Larry Summers and Paul Krugman of the New York Times continue to propagate this delusional fallacy? These individuals fall into the second category of "evil doers". When economic or natural disasters occur or when wars are rocking, government has an excuse to redistribute wealth (resources not money) to their corporate/union friends under the guise of public services. Many times conservatives inaccurately describe this type of redistribution as "socialism", while liberals and progressives inaccurately describe it as "capitalism". (hmm...interesting how these supposed opposites are so similar in outcome). While left and right argue over the details of what to call it, everyone is ripped off on a massive scale. On a similar note, our monetary policy is designed to support this scam. (See Video on scam)
This is not socialism or capitalism. The most accurate description of this economic policy is, "Interventionism", which is by design, beneficial to the power elite at the expense of the industrious.
From now on, when you watch destruction like this,
http://www.youtube.com/watch?v=e-A0NDsPcZY&feature=player_embedded
http://www.facebook.com/video/video.php?v=1605260179420
Pay attention to the talking heads. You'll be surprised and sickened by what is said by the so called experts.
