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From: stewart@ihldt.UUCP (R. J. Stewart)
Newsgroups: net.politics
Subject: Re: The WSJ on Reaganomics - (nf)
Message-ID: <2621@ihldt.UUCP>
Date: Tue, 27-Nov-84 10:25:33 EST
Article-I.D.: ihldt.2621
Posted: Tue Nov 27 10:25:33 1984
Date-Received: Wed, 28-Nov-84 03:18:06 EST
References: <421@hogpd.UUCP> <22400044@ea.UUCP>
Organization: AT&T Bell Labs, Naperville, IL
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>> ... Back to 
>> basic economic truth: the cost to the citizenry of government is the
>> total it SPENDS (plus some), not what it taxes or borrows.

> No it isn't.  When the Government spends money, it transfers money from
> one group of people to another.  There is no NET cost to society, since
> each dollar transferred can be used to buy something, whether a civil
> servant buys it or whether the worker who built an aircraft buys it.

Both of these miss the real cost of government.  The government is a
load on the economy the same way a casino is a load on gambling: some
gamblers win and some lose, but the house always gets its cut.

As a simple example, let's imagine that we're on an island with only a
baker, a fisherman, and a freeloader.  Normally the baker makes 2 loaves
of bread per day and the fisherman catches 2 fish per day, and they
trade loaves and fish so that each has 1 loaf and 1 fish.  One day, the
fisherman decides that it's wrong to let the freeloader go hungry, and
that he's going to force the baker to help feed the freeloader.

So now, everyone on the island gets 2/3 loaves of bread, the same total
amount as before.  But since the fisherman is spending his time
distributing the bread, the economy as a whole is poorer.

If the cost of administering the system is low, the load on the economy
is low.  It's easy to see, however, that in our real-life economy, the
system is large and inefficient, so there is much being consumed by
overhead that would otherwise go into production.

Bob Stewart
ihldt!stewart