Even when there are lots of idle workers, government bailouts and stimulus plans are not likely to add to employment. The reason is that bailouts and stimulus plans must be financed. The additional government debt means that existing current resources just move from one use to another, from private investment to government investment or from investment to consumption, with no effect on total current resources in the system or on total employment. And stimulus plans only enhance future incomes when they move current resources from less productive private uses to more productive government uses - a daunting challenge, to say the least.It's been over 150 years since the days of Bastiat, yet the government just keeps on breaking windows.
Wednesday, January 14, 2009
Why can't he be Treasury Secretary?
Eugene Fama has another great post on his blog, this time covering bailouts and fiscal stimulus plans. The article is definitely worth reading in its entirety, but I'll quote his conclusion.
Posted by second-tier at 1:43 PM