More on the False Thrift Paradox

Is the Economy a Perpetual Motion Machine?

03/25/2009 William L. Anderson

The lead story of the March 9, 2009, edition of Newsweek says it all:“Stop Saving Now!”

Writer Daniel Gross declares,

For our $14 trillion economy to recover and thrive, hoarders must open their wallets and become consumers, and businesses must once again be willing to roll the dice. Nobody is advocating a return to the debt-fueled days of 4,000-square-foot second homes, $1,000 handbags and $6 specialty coffees. But in our economy, in which 70 percent of activity is derived from consumers, we do need our neighbors to spend. Otherwise we fall into what economist John Maynard Keynes called the “paradox of thrift.” If everyone saves during a slack period, economic activity will decrease, thus making everyone poorer. We also need to start investing again—not necessarily in the stock of Citigroup or in condos in Miami. But rather to build skills, to create the new companies that are so vital to growth, and to fund the discovery and development of new technologies.

Now, this should hardly be surprising, coming from Newsweek, which has managed to mangle everything from economic analysis to the Duke lacrosse case. Furthermore, it is based upon economic myths that are repeated twice weekly by Paul Krugman at the New York Times and Larry Summers in the White House — and about every other public intellectual.

However, we need to remind ourselves that we are hearing myths that not only represent wrongheaded economic thinking but that are also driving the US economy into a deep depression through reckless spending and resource destruction. The actions of Obama and the Beltway are political in nature, but they have the veneer of economic “theory.”

If I can put the whole Keynesian set of fallacies into one statement, it would be this: the modern Keynesians believe that the economy operates like a perpetual motion machine, with government spending being the “grease” that keeps it from slowing down. The “friction” in this economic machine, according to the pundits, is private saving. Eliminate it, and the economy goes on forever, adding energy and expanding indefinitely.

Continue reading

From Mises.org, here.

There Is No ‘Paradox of Thrift’!

To address our current economic woes, classically-minded economists argue that the government should get out of the way and let the market heal itself. They warn that massive government “stimulus” packages only divert resources away from the private sector, thus delaying recovery.1

Keynesian economists say the opposite. They argue that the aggregate demand from the private sector is far below the level needed to ensure full employment. Consequently, the government must borrow and spend many hundreds of billions of dollars in order to close the “output gap.” The Keynesians do concede that during normal times a government budget deficit tends to “crowd out” private investment. But they claim that the worry about tradeoffs is irrelevant during an economic slump, when many resources are idle.2

Rather than tackling the entire debate in this article, I focus on a crucial component of it: the so-called “paradox of thrift.” According to this idea, what is wise and prudent for an individual household yields disaster for the community as a whole. During times of uncertainty, individuals naturally react by slashing discretionary spending to bolster their savings. And yet, according to believers in the paradox of thrift, when everybody tries to save more at the same time, the result is less saving and more poverty.

Continue reading

From EconLib, here.

מסע אישי בדרך הלימוד

איך חוזרים לבית המדרש?!

אליהו לוי נוגע בשאלה הכואבת והעמוקה – למה קל לעזוב את בית המדרש וקשה עד בלתי אפשרי לחזור אליו?!

בעולם היהודי-תורני לימוד התורה הוא ערך עליון. בכל יום אנו אומרים “כי הם חיינו ואורך ימינו ובהם נהגה יומם ולילה” ואף אם ישנם כאלה שאינם מצליחים להקדיש את כל עיתותיהם ללימוד, מחמת עול הפרנסה ושאר טרדות החיים, עדיין העיסוק בדברי תורה תופס בעולם הערכים שלהם מקום של כבוד, אולי אפילו בכורה.

בעולם הליטאי, בו גדלתי, מיטב שנות הנעורים של האדם מוקדשות ללימוד תורה וכיום מסלול החיים הטבעי של בן-ישיבה הוא הקדשת החיים כולם, מילדות ועד זקנה, להוויות דאביי ורבא. גם אני הקטן התחלתי את דרכי במסלול הרגיל של הלימודים התורניים – ישיבה קטנה, ישיבה גדולה, ואף הפלגתי בשנות לימודי בישיבה והגעתי עד מדרגת “אלטער-בוחר” שבע ימים. בשלב מסוים החלטתי כי ברצוני לרכוש לעצמי אומנות, כדי שבבוא היום אוכל לפרנס את משפחתי בכבוד. אמנם, גם אז לא עלה בדעתי לזנוח כליל את לימוד התורה ובדעתי עמדה המחשבה לבקש “אומנות קלה ונקיה” בה אוכל לשלב את עסק הפרנסה יחד עם העיסוק העיקרי במשנה ובגמרא. אלא שכאשר מפליג אדם מבית המדרש, לא קלה הדרך חזרה. כך נוכחתי לדעת בעצמי, והתבוננות קלה סביבי לימדתני כי המקרה שלי איננו יוצא מן הכלל, אלא זהו דפוס קבוע המצוי אצל בני ישיבות – כיוון שעזב אדם את בית-המדרש, ותהיה הסיבה אשר תהיה, אין הוא חוזר אליו על נקלה. על תופעה זו וסיבותיה ברצוני לדבר.

אם להיות כנה, כבר בימי שבתי בבית-המדרש לא הייתה דעתי נוחה בעיסוק המתמיד בתחום הצר של הלימוד הישיבתי. נכון אמנם כי באופן עקרוני לא מבחינים בעולם התורה בין סוגיה לסוגיה ולא אומרים “שמועה זו נאה ושמועה זו אינה נאה”, אלא שדבר זה מתקיים רק להלכה. למעשה, כולנו יודעים כי בית המדרש הישיבתי עוסק רק במבחר צר מאד של סוגיות, וגם בהם דרך מתודה מסוימת של שיטת הלימוד הישיבתית. אני מכבד ומוקיר מאד את שיטת לימוד זו, עליה גדלתי, אלא שמוכרחים להודות כי שיטה זו על יתרונותיה ממצה את עצמה כעבור זמן מה. במקרה שלי, כבר בשנתי השלישית בישיבה הרגשתי כי דרך זו הגיעה אצלי למיצוי, רכשתי את הכלים שהיא מעניקה ומעבר לכך היה זה חסר טעם להמשיך ולהתפלפל בגדרי ספק ספיקא ב’פתח פתוח’ או בהגדרות הקדש ובעלות ב’תקפו כהן’. הדיון בעניינים אלו מיצה את עצמו מבחינתי, על אף שבהחלט חיבבתי את המו”מ הישיבתי ואת ההעמקה בהגדרות מופשטות.

המשך לקרוא…

מאתר אגודה אחת, כאן.

Socialism is Trespassing (‘Nizkei Shcheinim’)

The Ecological Poison of Democratic Socialism

Latin America is once again demonstrating the social poison of “democratic socialism,” the ideology that won Bernie Sanders more than 13 million votes in the Democratic primaries.  Socialism – democratic or otherwise – is not only destructive of a nation’s economy, as history proved over and over again during the twentieth century; it is also ecological poison.  After the worldwide collapse of socialism in the late 1980s/early 1990s, we got a first look at what a country’s environment under a socialist system that banned private profit-making for decades looked like.  In a word, it was a catastrophe, as described in books with titles like “Ecocide in the U.S.S. R.”

The world learned that the socialist countries dumped untreated sewage into their rivers, streams, and lakes for decades; the Volga River in Russia was so polluted that boat were equipped with signs warning against throwing cigarettes in the water for fear the chemical-laden water would catch fire; factories had no pollution controls whatsoever; massive fish kills were routine; and the Polish Academy of Sciences reported that by the early 1990s one-third of the Polish people lived in areas of “ecological disaster.”

The old theory that the pursuit of profit in an unregulated economy is the root cause of pollution was shattered.  Unlike capitalist countries that hold polluters legally responsible for the damage they cause to others, in socialist countries politicians who are responsible for polluting nationalized industries bear little or no responsibility for it.  Government ownership of natural resources means, in effect, no one owns them, and when resources are all one big commons they are inevitably overused, abused, and exploited.  The absence of property rights and a sound liability law system is a recipe for ecological disaster, as all socialist countries have proven and continue to prove.

When a horrible accident created a deadly oil platform explosion in the Gulf of Mexico, privately-owned British Petroleum immediately created a $20 billion fund that it knew it would need for payment of damages.  In contrast, when the Mexican government creates far worse environmental and human disasters in the Gulf of Mexico it routinely does nothing by claiming “sovereign immunity.”  In the first five months of 2015 alone Pemex, the Mexican nationalized oil company, caused three catastrophic oil rig explosions that resulted in several deaths, numerous injuries to platform workers, and air and water pollution.  The Mexican government incredibly claimed that there were no oil spills, which was quickly proven to be a lie by satellite images of a three-mile-long oil slick provided by Greenpeace Mexico.

Television coverage of the Summer Olympics in Brazil is about to showcase the horrific pollution problems in that country, which has been ruled for many years by the “democratic socialist” Workers Party, which proudly proclaims “revolutionary socialism” to be its defining ideology.  In addition to creating some of the worst poverty in the world, the Brazilian government has turned that country’s once-beautiful beaches into stinking cesspools.

An August 2 article in the Daily Mail by Gareth Davies reported on a study of pollution in Rio de Janeiro on the eve of the Olympics which found the following:

  • Athletes have been told not to put their heads under water.
  • Viral levels in Guanabara Bay, where the triathlon will take place, are 1.7 million times higher than health-hazard levels in the U.S. and Europe.
  • Rubbish in some of the bays is so thick that you cannot see the water and rats live on top of the floating rubbish.
  • A floating corpse and a severed arm were recently spotted floating in Guanabara Bay.
  • There are extremely high levels of viruses in the sand on the beaches.
  • The virus level in Gloria Marina, where the sailing races will begin, are several thousand times higher than danger levels in the U.S.
  • “Black tongues of fetid, sewage-filled water” are “common” on “tony” Ipanema Beach.
  • Vast islands of sewage sludge are seen at low tide, dumped there by residential high-rise apartment buildings.
  • Many rivers are “tar black” from pollution.

Such ecological nightmares have become common in other Latin American “showcases” of “democratic” socialism.  Venezuela suffers from massive deforestation and its Lake Maracaibo is heavily polluted with 10,000 gallons of sewage per second dumped into it from the two million residences that surround the lake.  More than 800 companies, mostly related to the government’s nationalized oil industry, are permitted to dump industrial waste into the lake.  Massive Lake Valencia is also said to be “massively polluted,” and the government-run oil company, PDVSA, has reportedly filled more than 15,000 oil pits with contaminated sludge from oil wells that will inevitably seep into the ground water.

One lesson that all the Bernie Sanders-following millennials need to learn is that “democratic” socialism can not only destroy their economic future; it can also inflict irreparable harm on their natural environment.  Socialism is always and everywhere an economic and environmental disaster.

From Lewrockwell.com, here.