Friday, February 22, 2008

Something from Nothing

Frank Shostak, and adjunct scholar at the Mises Institute, has wonderful primer on the fallcies of Keynesian economics posted at the Mises Blog. If you ever wondered why some of us have a problem with Keynes, just read this paragraph:

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course by tendering for leases of the note-bearing territory), there need be no more unemployment and with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.[2]

Why exactly would the performance of a useless activity increase wealth? This is just ridiculous. Shostak's article uses clear thinking to demolish the logic (or rather the lack thereof) of the current "stimulus" plan.

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