Are "Bailouts" and "Economic Stimuli" Effective?

Of course not.

Unless you define "effective" as the compulsory transfer of property from a productive person to another who has not earned it.

And, unless you define "effective" as reducing overall wealth; e.g., "The economic stimulus has was effective in making people poor."

Let's examine a simple case where there are only three people in the world; you, me, and a politician. And let's say that you grow potatoes, I do nothing, and the politician does politics. One day, the politician declares that the economy of our three-person society will be better off with a "stimulus" comprised of you giving me a large bag of potatoes. The idea, according to the politician, is that I will spend my new wealth -- which will "stimulate" the economy.

OK, I then spend my new wealth on...well, your potatoes -- because that's the only thing to buy in our world. We can obviously simplify this process by declaring that some of what you produce must be given to me. This makes me richer and you poorer, with a net effect of zero. Unless, of course, you grow tired of wasting your effort to produce things for ungrateful people who choose to not work, and you cut back on potato growing. In that case, the net effect of the "stimulus" is negative. That is, I am richer -- but you grow more poor than I have grown rich.

But the politician might say that if I was loaned a few potatoes, as in a "bailout", I would then have the energy to create a potato-mashing machine that would make everyone better off. However, if my machine would make you better off, then you would voluntarily lend me potatoes so that I could make my machine. The fact that the politician is forcing you to give me potatoes ought to set off alarms about the viability of my machine plans.

The real world is obviously more complex that this example, but the principles are the same:

1. The net economic effect of taxation (i.e., forcibly transferring things from the productive to the unproductive) is, at best, zero -- and is probably negative.

2. The morality of the above point is summed up in a word called "stealing". Or, if you resist the theft, you can add the terms, "aggravated harassment", "menacing", and "assault".

3. Back to economics, encouraging people to buy things makes others worse off. If the "economic stimulus" money is used by the unproductive to buy things, then there will be fewer things for the productive to enjoy. The only way to increase affluence is though abundance, and the only way to increase abundance is through production. And if the recipients of "stimulus money" are not producing, then there will be no increase in wealth.

Now, one might say, "Hold on fella, poor people need the money!"

Misleading as that assertion is, it is also unrelated to the stated purpose of a stimulus. You can try using the "poor people" argument to defend taxes, but that is not the same as a "stimulus" argument. And so are other irrelevant arguments, like taxation to correct for externalities. Whatever the merits of those arguments, they are nevertheless unrelated to a general "economic recovery" by way of taxation.

Why, you might ask, does not the citizenry therefore reject the demands of stimuli and bailouts? Because the appeal of utopia is too attractive to decline.

What Is The Basis Of Morality?

This is an update of an earlier post.

It's still incomplete, but here are ten items that can define a philosophical basis of morality:

1. Utilitarianism (The most people the most happy; e.g., democracy) vs. Individual rights

2. Free will (You have the ability to make choices) vs. Determinism (Your choices are predetermined by your biology)

3. Violence vs. Nonviolence

4. Absolutism (Truth is universal) vs. Relativism (All views are equally valid)

5. Absolutism (Truth is universal) vs. Contextualism (Truth can be dependent on context.)

6. Skepticism (All claims must be backed by proof) vs. Faith (Claims can be accepted unless proven wrong)

7. Individualism (Only individuals have rights) vs. Collectivism (Only groups of people have rights)

8. Cooperation (Agreement and collusion) vs. Defection (Disagreement and competition)

9. Liberalism (Individual responsibility) vs. Paternalism (Forced guidance by others)

10. Equality (All outcomes must be the same) vs. Equity (All opportunity must be the same)

Does Welfare Stimulate The Economy?

It sure does, if you ask Congress and The President:

Deal Struck to Send Checks to Taxpayers

Most single taxpayers would get $600 and most two-wage households would get at least $1,200. The deal includes an additional amount of $300 per child. A total of 116 million taxpayers will receive checks of some size.

Why only $600? Imagine what $6,000 government checks would do.

Does anyone know what the disturbing phrase "stimulate the economy" actually means, anyway?

President Bush, saying the deal would give the economy a shot in the arm, urged quick passage.

"Our economy is structurally sound, but it is dealing with short-term disruptions in the housing market and the impact of higher energy prices," Bush said. "These challenges are slowing growth."

What, exactly, is he talking about? "Shot in the arm?" "Short-term disruptions in the housing market?" What is a "market disruption"?

Well, it appears that:

A) We might or might not have a "financial crisis", at least on paper.

B) If one group of people takes property from a second group of people, then apparently everyone benefits.

"This is a middle-class initiative to strengthen the middle class and those who aspire to be in the middle class," said Pelosi. She said the relief was targeted to "those who need the money and will spend the money."

Just make sure that the money stays out of the hands of people who do NOT need the money...

Is Wealth Acquired by Accident?

Is Wealth Acquired by Luck?

It is an accident that you just happened to be born to parents with the means to provide for you. And it is also by luck that you happened to be born in a country that permits you to get a decent job. And it is also your luck that you were not born in the 15th Century. And, for that matter, it was also a winning gamble that you were not born with a debilitating birth defect.

Further, you are lucky to have inherited characteristics that have enabled you to become wealthy -- whether it's a superior physical ability or a high IQ. And, perhaps your parents used those lucky genetic traits to accumulate wealth to pass to you in the form of an inheritance.

And it could be pure luck that enables you to have the patience and diligence to perform difficult, tiresome, and tedious work -- the sort of work that might make you wealthy.

But...you are, by definition, who you are. You are no more lucky that you were born rich than you are lucky that you weren't born a cockroach. There was never any chance that you would have been born a cockroach, and there was never any chance that you would have been born anything than what you are. If you were born as someone different, then "you" would not be "you".

So, what does all this mean? What are the implications? What is the "therefore..."?

Would it therefore be correct to say that "the implication is that wealth is not really earned, and should therefore be distributed to those who are less well-off?"

If the answer is "yes, my wealth is unearned and should be given to others", then you should give all your money to cockroaches. And maybe you should give your money to plants and bacteria as well.

Or, if you prefer to give to your own species (and why would you?), then your every last "lucky" penny could be transferred to the unlucky poor around the world. You would then be brought down to their absolute poverty, and they would not notice any change in their living standards. Ten million dollars is enough to give a penny to one billion poor people.

In the end, we would have one billion and one poor people.

Unless, of course, all the lucky people in the rich countries were forced to turn over everything they have to the folks in Burundi and Malawi. That way, everyone in the world can be unlucky. Problem solved.