Consider a robber who steals a purse containing $500, who then uses the money to buy himself a new TV. It is categorically undeniable that the theft has created a sale for the TV store. Conservatives who pretend the stimulus has not created any jobs whatsoever stand in the position of an observer trying to deny the TV has been sold.
Yet the liberal analysis lacks any recognition that the purse owner now has $500 less to spend on the laptop computer she was going to buy. The theft has generated one sale only by destroying another.
The first effect is easily seen. The second is not. But only the economically illiterate would conclude that just the first effect occurred, and that therefore the way to increase consumption is to encourage more purse-stealing.
Friday, June 24, 2011
An excellent analogy in this article: