With the presidential campaign season in full swing, a number of hopefuls have made a point of specifying the monetary cost of various government programs. Some have done so in the context of how they will finance their own ideas while others have used the opportunity to argue that we can’t afford to pay for the programs we already have in place. In both cases, however, they are missing a fundamental point: at the national level, money is not the issue, resources are. Furthermore, once this becomes clear, it is evident that not only can we can “afford” everything currently in place, we can do more. There is such thing as a free lunch when we have idle resources and how much money we have has absolutely no bearing on this.
For the individual, having money is extremely important as it represents a claim on existing resources. The more money you have, the more you can claim. It’s a bit like having a winning raffle ticket. If you have three winning tickets, you get three prizes; if you have zero, you get none. To the organizers, however, the tickets are an afterthought. The scope of their event is limited by the number of prizes available, not how many claims exist. They would never say, “We can’t afford to do the raffle this year because we don’t have enough winning tickets!”
Yet this is precisely what many presidential candidates are arguing. When someone says, “We can’t afford to continue to fund Social Security,” they are saying that we lack sufficient winning tickets to hand out to seniors. Okay, print some more. If that’s the only problem, then solving it is trivial (notwithstanding any politics). On the other hand, if we lack the ability to produce sufficient goods and services for both the working and the retired, then we’re screwed. Our ability to support Social Security depends on productivity and not how much money we have.
Frontal assault at Forbes.
Forbes — Pragmatic Economics
Yes, There Is Such Thing As A Free Lunch
John T. Harvey | Professor of Economics, Texas Christian University
10 comments:
If someone doesn't understand John here, then they are stupid......
Post that comment and support the man!
I find the ticket analogy pretty good, worth keeping to explain this... to people who won't understand or don't want to understand.
This is written so simply that if you are saying after reading It: "I cant understand a thing", then you should consider not to get involved in economic policy at all. You don't have the talent to understand economics. Try something else.
I don't know. Forbes is such a Radical Leftist rag. /satire, ok?
I find the ticket analogy pretty good...
Mosler's scorekeeper analogy is another good one.
452 views, 1 comment. Off to a slow start?
The title is turning some people away. They already know that they will not agree so they don't look. Epistemic closure.
John at Forbes is like Mike at Fox, the difference being that Mike got exposure if people didn't switch channels, while people can choose what they want to read. John at Forbes is a voice crying in the wilderness. But it's good to have someone there saying it anyway.
Steve Keen is on Forbes talking sense as well.
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