the flipside of failure is opportunity ... the failure of certain chains and restaurants has created opportunities for other eating establishments to expand. Restaurant growth in any kind of economy is expensive, but it's cheaper for chains to convert existing restaurants than to build them from the ground up. Thanks to the closing of various eateries nationwide, expansion for rising chains has been less expensive … It would be impossible to calculate, but it's likely that the creation of the Hummer brand (and the factories necessary to build it) from scratch would have cost many multiples of the $500 million that Sichuan paid GM for Hummer. The Chinese company will now be able to grow on the relative cheap, and as GM announced at the time of the deal, its purchase means that 3,000 U.S.-based jobs will be saved. All of these stories are in no way meant to minimize the pain of losing one's house, job or business. Still, these stories do remind us that just as the human body frequently heals itself during times of illness, the economy is ultimately comprised of self-interested individuals who, if left alone, will work in order to improve their individual financial situations. In that sense, the answer to our sagging economy today is not more government intervention, but instead a humble federal government that will sit back and let the economy heal itself. The flipside of economic failure is economic opportunity, and it's time for Washington to get out of the way so that individuals can turn misfortune into opportunity.
Yes – laissez-faire as markets always clear. Like Lord Keynes, Ezra Klein knows this is utter BS:
That's quite a conclusion based off five anecdotal examples. Indeed, as a macroeconomic prediction, it's not even clear what it means. What would a "humble federal government" do, exactly? Shut down the stimulus projects so a couple million more people end up unemployed and a couple million other people can buy their possessions at fire sale prices? Shut down the system of financial supports which are currently sustaining a weakened lending market? Should they have held back from Detroit's collapse so that the assets of the various companies were simply liquidated, along with what was left of the Rust Belt's economy? Should they cut off economic aid to the states so infrastructure literally crumbles? I want specifics! The idea that government should get out of the way because Panera has taken over eight of Bennigan's former locations beggars belief. At the end of the day, it will be a resuscitation of household spending and business expansion that restarts our economic growth. But for now, both have fallen through the floor, with terrible consequences for both individuals and businesses. What little demand exists is being substantially kept afloat by the massive intervention of the federal government. At this moment, federal spending does not exist in competition with household spending. It's one of the last forces sustaining it. Indeed, the idea that the economy will heal itself if the government only steps out of the way is exactly the thinking that led to the deep recession of 1937. What a pity those lessons haven't been better learned.
Question to the editors of Forbes – why did you even bother to publish Tamny’s musings?
"Indeed, the idea that the economy will heal itself if the government only steps out of the way is exactly the thinking that led to the deep recession of 1937. What a pity those lessons haven't been better learned."
ReplyDeleteLike with health care, the AMA's "Physician heal thyself" will result in a lot of sick doctors - and their patients.
Does Gresham's Law not apply to economists or their predictions? Tammy still seems to have a job.
ReplyDeleteI seem to recall that "bad money drives out good". Was that Gresham? It seems that bad economists certainly drive out good. Whichever economists agree with trickle down theory and support it with policy that enhances the privatization of economic rent will be the names that find their way into the mass media. The universities that teach Friedmanism will be well endowed and those that don't will be paupers.
ReplyDelete"...the economy is ultimately comprised of self-interested individuals who, if left alone, will work in order to improve their individual financial situations. In that sense, the answer to our sagging economy today is not more government intervention,"
ReplyDeleteThe role of government is to assure all "self interested" participants in the economy that such participation will be free from fraudulent activities. In and around 1999-2000 several of our esteemed elected officials saw fit to "enhance" financial markets by de-regulating their activities.
A truly brilliant idea, at least it was for the more larcenous of the crowd.
i actually like the idea that markets clear as an assumption. it makes modeling easier. you just have 'hidden variables' or markets which are either unobserved, not accounted for or properly measured, or denied as real by some people. (the last assumption can lead to things like arrow's theorem as shown by saari, as can the second due to incomparable utility----incomparable or immeasurable utility applies to my own music---its off scale---and blogs two).
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