Economic fallacy even a progressive can understand

[Ockham]

The Broken Window Fallacy



This is modern version of Schoolhouse rock which points out how and why stimulus spending really doesn't work and why it's stupid to begin with. So simple even a progressive can understand it.

It’s that simple. Wealth can either stay in the private sector or the government can rip it out and use it for it’s own purposes. Anytime the government takes wealth out of the private sector that will, inevitably, result in lower productivity from the private sector.

That, of course, leaves us to one conclusion. The only way you can believe that government programs stimulate the economy is if you believe that the government is more efficient than the private sector. And the only way you can believe the government is more efficient than the private sector is if you’re a life-long shut-in who is also high on crack.

 

[Renae]

Sadly, few here who need to heed this message, will even bother.

 

[Ockham]

Sadly, few here who need to heed this message, will even bother.

If nothing else, it is good reference and goes in the record... I'm bookmarking this thread for future use as nose rubbing material.

 

[pbrauer]

Have you guys ever heard of priming the pump? During recessions people lose their jobs and have no money to spend. If people have no money to spend, more people lose their jobs - it's a downward spiral.

The purpose of the stimulus is put money into construction projects that need to be done anyway. This puts people to work and the money goes into the economy.

One of the problems with the stimulus package that was passed, was because almost a third of it was tax breaks. And tax breaks have very little stimulative effect.

Another problem is that so much of the potential jobs have outsourced to coutries like India and China. Go into any store and see where the items have been manufactured.

Go lookup and see what Adam Smith had to say about this.

 

[justabubba]

that video is a production by those without an understanding of economics for those who are ignorant of economics. it's sub-title should read blind leading the clueless

no doubt many who subscribe to taxes breaks for the wealthy while simultaneously complaining of increasing federal deficits will give this two thumbs up ... if only they possessed opposable thumbs

 

[Renae]

that video is a production by those without an understanding of economics for those who are ignorant of economics. it's sub-title should read blind leading the clueless

no doubt many who subscribe to taxes breaks for the wealthy while simultaneously complaining of increasing federal deficits will give this two thumbs up ... if only they possessed opposable thumbs

Too bad you didn't watch the video father then 10 seconds in. Your fellow Progressive Liberal pb should ya know.. WATCH the video.

 

[Renae]

Have you guys ever heard of priming the pump? During recessions people lose their jobs and have no money to spend. If people have no money to spend, more people lose their jobs - it's a downward spiral.

The purpose of the stimulus is put money into construction projects that need to be done anyway. This puts people to work and the money goes into the economy.

One of the problems with the stimulus package that was passed, was because almost a third of it was tax breaks. And tax breaks have very little stimulative effect.

Another problem is that so much of the potential jobs have outsourced to coutries like India and China. Go into any store and see where the items have been manufactured.

Go lookup and see what Adam Smith had to say about this.

Priming the pump is the equivalent to breaking the window. Watch the video, see why you are being giggled at.

 

[Hoplite]

Its a valid point, but it oversimplifies the situation.

How much have taxes increased since the stimulus? Not by an appreciable amount.

If you have a large number of people without jobs, lowering the taxes on people and hoping they spend money does not ensure the return of jobs for the individuals without jobs.

The video is essentially advocating gambling, you are taking a gamble that reducing taxes will increase consumer spending when that is not a guarantee. You also cant guarantee that that money will be spent domestically or that it will be spent to grow the economy. Also, reducing taxes means less money for areas of the government that go towards services that people depend on; Medicare, Social Security, food stamps etc etc. If you cut funding to these programs as a response to a drop in taxes, you are gambling again that the people you cut loose will be able to find jobs with this new economic spurt that you gambled would happen.

Either way, the working poor lose out.

 

[Renae]

Its a valid point, but it oversimplifies the situation.

How much have taxes increased since the stimulus? Not by an appreciable amount.

If you have a large number of people without jobs, lowering the taxes on people and hoping they spend money does not ensure the return of jobs for the individuals without jobs.

The video is essentially advocating gambling, you are taking a gamble that reducing taxes will increase consumer spending when that is not a guarantee. You also cant guarantee that that money will be spent domestically or that it will be spent to grow the economy. Also, reducing taxes means less money for areas of the government that go towards services that people depend on; Medicare, Social Security, food stamps etc etc. If you cut funding to these programs as a response to a drop in taxes, you are gambling again that the people you cut loose will be able to find jobs with this new economic spurt that you gambled would happen.

Either way, the working poor lose out.

Ahh, the Progressive class argument about the "working poor". Ya know what? PEOPLE LIKE YOU ENSURE THEY REMAIN WORKING POOR.

Investing in businesses requires capital, requires credit. People like you, would tax those resources to give poor folks "shovel ready jobs". That might be great for 6 months, but long term, guess what? The money that could have gone to a new factory, a new IT company instead went to more taxes to pay that guy 20k to shovel dirt.\

6 Months goes by and that ditch is dug... but now the money has run out.... so raise taxes, and find a NEW ditch to dig. Meanwhile that IT Company or that factory still hasn't been built. So instead of having a shot at a job that pays 40K, our guy is working for 20K. Oh, and it cost

Assuming that's right, that $16 billion created or saved some 60,000 jobs — which still clocks in at $267,000 per person.

(just using an example)

Stimulus Math: $533,000 Per Job Saved or Created? - EconWatch - CBS News


"Gov't Spending" = Massive waste of resources, in this case MONEY. Money that could be better used in the private sector.. oh wait...
I know what the response will be...

"I'd rather the Gov't waste money giving jobs to people that need it rather then stuffing the bank accounts of the super rich!!!"

 

[Hoplite]

Investing in businesses requires capital, requires credit. People like you, would tax those resources to give poor folks "shovel ready jobs". That might be great for 6 months, but long term, guess what? The money that could have gone to a new factory, a new IT company instead went to more taxes to pay that guy 20k to shovel dirt.

If, by means of a stimulus, you can put people to work earning money (and paying taxes), not only will you have people working, but they'll have money to spend. More people will have spending money even though the individual may have a little less. This increase in spending (and there is a guaranteed increase, those without money spend almost nothing and if they get money, they'll spend it) goes back into the economy and gives you your recovery.

So simple even Conservatives can understand

 

[pbrauer]

Ahh, the Progressive class argument about the "working poor". Ya know what? PEOPLE LIKE YOU ENSURE THEY REMAIN WORKING POOR.

Investing in businesses requires capital, requires credit. People like you, would tax those resources to give poor folks "shovel ready jobs". That might be great for 6 months, but long term, guess what? The money that could have gone to a new factory, a new IT company instead went to more taxes to pay that guy 20k to shovel dirt.\

6 Months goes by and that ditch is dug... but now the money has run out.... so raise taxes, and find a NEW ditch to dig. Meanwhile that IT Company or that factory still hasn't been built. So instead of having a shot at a job that pays 40K, our guy is working for 20K. Oh, and it cost (just using an example)

Stimulus Math: $533,000 Per Job Saved or Created? - EconWatch - CBS News


"Gov't Spending" = Massive waste of resources, in this case MONEY. Money that could be better used in the private sector.. oh wait...
I know what the response will be...

"I'd rather the Gov't waste money giving jobs to people that need it rather then stuffing the bank accounts of the super rich!!!"

What good does it do to build a new factory when people don't have the money to buy the products it produces? And more that likely that factory today will be built in China.

Just look at the trade deficit and you'll see how Voo Doo economics is working for us.

 

[Renae]

If, by means of a stimulus, you can put people to work earning money (and paying taxes), not only will you have people working, but they'll have money to spend. More people will have spending money even though the individual may have a little less. This increase in spending (and there is a guaranteed increase, those without money spend almost nothing and if they get money, they'll spend it) goes back into the economy and gives you your recovery.

So simple even Conservatives can understand

Except that you believe government spending does more good then harm, when all evidence throughout history has shown this not to be true.

So, really, no, spending billions to get people that DO NOT PAY TAXES **** jobs that produce nothing, create no wealth and merely are there to "give people jobs" is NOT a positive, it's an enormous waste of resources for political gain. FDR and the Great Depression should have taught America that Gov't spending does not save the economy, sadly our education system has so devolved people believe FDR got us out of the GD... sad really.

BTW With all this "Stimulus spending" how come consumer confidence is so low? Oh that's right, cause your theory doesn't actually pan out in real life.

 

[Hoplite]

Except that you believe government spending does more good then harm, when all evidence throughout history has shown this not to be true.

So, really, no, spending billions to get people that DO NOT PAY TAXES **** jobs that produce nothing, create no wealth and merely are there to "give people jobs" is NOT a positive, it's an enormous waste of resources for political gain. FDR and the Great Depression should have taught America that Gov't spending does not save the economy, sadly our education system has so devolved people believe FDR got us out of the GD... sad really.

BTW With all this "Stimulus spending" how come consumer confidence is so low? Oh that's right, cause your theory doesn't actually pan out in real life.

When you can get some decaf and NOT respond strictly with ranting, then we can try and talk. Until then, chill out.

 

[pbrauer]

 

[prrriiide]

sadly our education system has so devolved people believe FDR got us out of the GD... sad really.

Actually he did. Just not the way it is normally perceived. What got the US out of the depression was the near-100% of GDP that went into the war effort. You want to talk about stimulus and massive government spending?

What's even sadder is that our education system has produced so many people with concrete minds - all mixed up and firmly set. Common sense, critical thinking, and civility are as foreign to our politics as borscht, kim-chee, and haggis are to our diets.

And by the way...you do know who is responsible for the low-income people (the ones that don't pay taxes) not paying taxes, don't you? DON'T YOU? Hint: He signed the Tax Reform Act of 1986...

Sadly our education system has so devolved people believe RR was the Great Conservative Savior, which is revisionist history... sad really.

BTW With all this "Stimulus spending" how come consumer confidence is so low? Oh that's right, cause your theory doesn't actually pan out in real life.

Consumer confidence is so low because 1) nobody believes the government can find their collective ass with both hands and a roadmap right now, 2) It doesn't matter what is proposed, the GOP is going to hammer it into the ground and use it as election fodder, even if it is the smart thing and the right thing, 3) it's hard to be confident when your municipality is effectively bankrupt, your kid's teachers are being laid off, your home value is STILL going down, and you can't get a loan for a used car, and 4) why should Joe Consumer be confident when the sector of the economy that has (access to) money is holding $3 trillion in private invesment capital out of the economy? If they aren't going to stimulate the economy, and the government shouldn't stimulate the economy (in your opinion), just who in the blue f**k is going to do it? You? How's your theory workin' out for ya? Cause it ain't really panning out in real life, either.

 

[Renae]

What good does it do to build a new factory when people don't have the money to buy the products it produces? And more that likely that factory today will be built in China.

Just look at the trade deficit and you'll see how Voo Doo economics is working for us.

Just look at the unemployment and see how your brand of "economic success" is helping us.

Companies move overseas when it becomes too expensive to make products/services here. Why do they do that? Taxes and Unions.

 

[Renae]

When you can get some decaf and NOT respond strictly with ranting, then we can try and talk. Until then, chill out.

I am chill. Do you believe FDR's policies lead to the end of the great depression?

 

[Renae]

Actually he did. Just not the way it is normally perceived. What got the US out of the depression was the near-100% of GDP that went into the war effort. You want to talk about stimulus and massive government spending?

What's even sadder is that our education system has produced so many people with concrete minds - all mixed up and firmly set. Common sense, critical thinking, and civility are as foreign to our politics as borscht, kim-chee, and haggis are to our diets.

And by the way...you do know who is responsible for the low-income people (the ones that don't pay taxes) not paying taxes, don't you? DON'T YOU? Hint: He signed the Tax Reform Act of 1986...

Sadly our education system has so devolved people believe RR was the Great Conservative Savior, which is revisionist history... sad really.



Consumer confidence is so low because 1) nobody believes the government can find their collective ass with both hands and a roadmap right now, 2) It doesn't matter what is proposed, the GOP is going to hammer it into the ground and use it as election fodder, even if it is the smart thing and the right thing, 3) it's hard to be confident when your municipality is effectively bankrupt, your kid's teachers are being laid off, your home value is STILL going down, and you can't get a loan for a used car, and 4) why should Joe Consumer be confident when the sector of the economy that has (access to) money is holding $3 trillion in private invesment capital out of the economy? If they aren't going to stimulate the economy, and the government shouldn't stimulate the economy (in your opinion), just who in the blue f**k is going to do it? You? How's your theory workin' out for ya? Cause it ain't really panning out in real life, either.

Nope sorry.

The war wasn't what ended the GD, the post war BOOM did. Ya know, the one that happened after the Gov't quit spending money...

And as for your silliness about "Who is going to stimulate the economy".

THAT'S EASY!

Get Gov't out of the way, repeal Obamacare, repeal the FinReg monstrosity, pull "cap and trade" from even being considered, tell the EPA to take the CO2 regulations and burn them, cut Gov't spending by 30% and taxes across the board (or better move to the fairtax national sales tax) And within 18 months you'll see the economy explode to life.

OR you can keep dreaming this fallacious fantasy that Business can thrive under heavy regulation, taxation and Gov't demands and future uncertainty in just how much meddling the Gov't will do in the day-to-day operation of business.

 

[Slartibartfast]

The Broken Window Fallacy



This is modern version of Schoolhouse rock which points out how and why stimulus spending really doesn't work and why it's stupid to begin with. So simple even a progressive can understand it.

I guess this fallacy would be good if the thing being built is equal to what is being destroyed. If what is being built is better (more efficient, more production, whatever) than there is a profit to be made.

 

[justabubba]

Too bad you didn't watch the video father then 10 seconds in. Your fellow Progressive Liberal pb should ya know.. WATCH the video.

its only a three and a hlaf minute video
i would like that wasted time back, however, recognizing what a waste that was
as i said before, it was nothing other than an ignorant presentation for ignorant people
the premise was that there are people making public policy who believe that destroying stuff creates a path to economic progress
now prove me wrong and point me to such stated public policy

 

[Renae]

its only a three and a hlaf minute video
i would like that wasted time back, however, recognizing what a waste that was
as i said before, it was nothing other than an ignorant presentation for ignorant people
the premise was that there are people making public policy who believe that destroying stuff creates a path to economic progress
now prove me wrong and point me to such stated public policy

It's not a literal translation, and you PROVED you didn't watch the video. Seeing as that isn't what the discussion is about.

You just pwned yourself! Congrats!

 

[Renae]

I guess this fallacy would be good if the thing being built is equal to what is being destroyed. If what is being built is better (more efficient, more production, whatever) than there is a profit to be made.

If you watch the video, you see why you are wrong.

 

[pbrauer]

I am chill. Do you believe FDR's policies lead to the end of the great depression?

It brought down unemployment significantly. Unfortunately he was convinced to start balancing the budget circa 1938, so some unemployment lingered. It was the great public works project - WWII - that took us out of the Great Republican Depression.

Do you not see the fallacy in the parable "The Broken Window Fallacy?" Who proposed using public funds for fixing shops that were vandalized. Answer: Nobody. That's not what Paul Krugman said in the video.

 

[Slartibartfast]

If you watch the video, you see why you are wrong.

The video and I are making different assumptions.

For example, in the baker scenerio, it is assumed that whatever the money the baker would have spent would have equal productivity in the economy as repairing the window. This may be true and it may be not. Not all money spends equally or builds wealth equally. While it is hard to argue the baker example, since it is a simple one, I will go to the greater economy.

There was a chart that showed the stimulative effect of not taxing someone over food stamps.

This pretty much shows that moving money from one group to another can in fact help the economy since spent money has a different effect depending on its purpose. The problem with the example in the video is that it does not analyze this fact and assumes that all spending is fundamentally equal.

So, no, the video is not prove me wrong.

 

[Ockham]

its only a three and a hlaf minute video
i would like that wasted time back, however, recognizing what a waste that was
as i said before, it was nothing other than an ignorant presentation for ignorant people
the premise was that there are people making public policy who believe that destroying stuff creates a path to economic progress
now prove me wrong and point me to such stated public policy

You've effectively proved me wrong... the video wasn't simple enough apparently.