Wednesday, July 11 2012

Government Economics Made Stupid I

In capitalism, I spend time and effort to produce something, which I trade for money. I use that money to buy something, which is more valuable to me than the time and effort I spent to make the money.  The more things that I produce, the more money I normally get to consume things.  Things in this case includes physical products, consumables, services, quality of service (I'm willing to pay more for better service), charity (goodwill) and even savings (in the sense I'm paying into savings now for 'insurance against future fiscal problems' later).  When I choose to spend money on something, I do so knowing that what I get is more valuable to me than the money I trade for it.

The government sucks at producing things efficiently.  Because you don't have a choice about how much to give them, they don't compete for your money and work to make sure they provide a service that is worth the money you give them.  The reason I'm not a complete libertarian is that I recognize there are things only the government can do due to scale, complexity, and uniqueness factors, such as build and maintain a road network (although they can, should and do contract out individual portions of the construction and maintenance on a competitive basis, I'm talking about the total system), run a justice and legal system, and kill Nazis and terrorists.

Consumption, in total among the whole population, is limited by production.  You can't consume what isn't produced.  Since government production is inefficient, having the government produce things results in a net loss of production than if the same resources were used privately.  If you redistribute money, you redistribute consumption for the same production, so there are always winners and losers.  To boost the economy, you need to increase production, so people get more things they want.  Relying on the government to spend our way out of economic problems doesn't work.

Posted by: Civilis at 09: 23 PM | No Comments | Add Comment
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