| Posted: 12 November 2008 at 8:48pm | IP Logged | 5
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Joe, a bailout might help one group of people but it will hurt another group of people. The money used to bailout failing companies might have been used to purchase something from another company or it might not have been taken from a person in the form of taxes and he might have used that money to buy from someone else but now he can't. Economics is connected to everything. Short-term thinking is the worse think you can do with economics.
The bailouts are a horrible idea. If the car companies cannot compete or survive, let them fail. Someone else will show up and build cars that people want. This is the free-market system, which unfortunately has never really been tried in the modern world. Government should not be involved.
The following is from "Economics in One Lesson" by Henry Hazlitt, a very famous economics book that should be read by all politicians.
Let us begin with the simplest
illustration possible: let us, emulating Bastiat, choose a broken pane of
glass.
A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs
out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the
gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd
feels the need for philosophic reflection. And several of its members are almost certain to remind
each other or the baker that, after all, the misfortune has its bright side. It will make business
for some glazier. As they begin to think of this they elaborate upon it. How much does a new plate
glass window cost? Two hundred and fifty dollars? That will be quite a sum. After all, if windows
were never broken, what would happen to the glass business? Then, of course, the thing is endless.
The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more
to spend with still other merchants, and so ad infinitum. The smashed window will go on providing
money and employment in ever-widening circles. The logical conclusion from all this would be, if the
crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a
public benefactor.
Now let us take another look. The crowd is at least right in its first conclusion. This little act
of vandalism will in the first instance mean more business for some glazier. The glazier will be no
more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will
be out $250 that he was planning to spend for a new suit. Because he has had to replace a window, he
will have to go without the suit (or some equivalent need or luxury). Instead of having a window and
$250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead
of having both a window and a suit he must be content with the window and no suit. If we think of him
as a part of the community, the community has lost a new suit that might otherwise have come into
being, and is just that much poorer.
The glazier’s gain of
business, in short, is merely the tailor’s loss of business. No new
“employment” has been added. The people in the crowd were thinking only of two
parties to the transaction, the baker and the glazier. They had forgotten the
potential third party involved, the tailor. They forgot him precisely because
he will not now enter the scene. They will see the new window in the next day
or two. They will never see the extra suit, precisely because it will never be
made. They see only what is immediately visible to the eye.
Edited by Neil Lindholm on 12 November 2008 at 8:56pm
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