Ideas About Stimulus

I found out recently that the Christian Science Monitor published an excerpt from John Maynard Keynes’ “General Theory” next to an expert from Frederic Bastiat’s “What is seen and what is not seen” about economic stimulus. What a cool idea!  Here’s the link.

It’s a pity they didn’t publish just a little more of Bastiat’s article.  He goes on to apply the idea of the broken window more explicitly to questions of stimulus.  He shows that all government spending and stimulus requires a drain on resources (through taxation, inflation, and/or government borrowing), which amounts to an anti-stimulus somewhere else.  This is just a fact.  So the real issue about economic stimulus is not whether to have stimulus or not, but whether it is more effective for governments to direct the resources available for stimulus according to a central plan or to allow dispersed individuals to allocate their own resources according to their local knowledge.

Here’s a video that was flying around the blogosphere last week that applies Bastiat’s principle of the broken window to the recent issue of stimulus.

[youtube=http://www.youtube.com/watch?v=xV5Ulu86-TY&hl=en&fs=1]