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Don't fall for the broken window fallacy. If the government wasn't taking money from people via taxation to pay for pothole fillers, then the taxpayers would h
by JeffL 15y ago
Don't fall for the broken window fallacy. If the government wasn't taking money from people via taxation to pay for pothole fillers, then the taxpayers would have their money to spend on what they really want, which would also maintain the virtuous cycle. What you see is the pothole fillers spending money, but what you don't see is all the people who had their money taxed spending less. (If the taxpayers weren't spending their money, it would be in banks being loaned out to other people who would be spending it.)
If what you're talking about is Keynesian government stimulating the economy in bad times by going into debt, that could also be accomplished by cutting taxes rather than borrowing to pay pothole fillers.
- clarkevans 15y agoWell, yes, instead of having potholes fixed, we'd be repairing the frame of our cars instead, at much much higher cost (and not doing other things). Further, pothole fillers end up employing lots of different kinds of people than a millionaire would. Finally, banks tend to loan to people with money... they don't typically loan to those who don't have money; it's not a zero-sum game.
- JeffL 15y agoI think you have a good point about filling potholes being cheaper than repairing cars, but that wasn't really the point I was making. (I'm not necessarily against filling potholes, just filling potholes excessively as make-work.) I was just pointing out that saying that government spending to hire pothole fillers for the express purpose of stimulating the economy is falling for the broken window fallacy. http://en.wikipedia.org/wiki/Broken_window_fallacy http://en.wikipedia.org/wiki/Broken_window_fallacy
- achompas 15y agoIt's actually not--you're misunderstanding the broken window fallacy. The classic example goes like this: "Let's break windows and hire people to replace them! That's a stimulus!" OP did not suggest digging holes into the street and filling them, however--fixing road wear-and-tear is an investment in public infrastructure.
- JeffL 15y agoMaybe I misunderstood, but I got the feeling from the OP I was responding to that he was suggesting we fill more potholes in order to stimulate the economy. I'm kind of working off the assumption that we are already filling the important potholes often enough, so filling more potholes just to spend money sounds like make-work.
- achompas 15y agoThat's a good take, but the broken window fallacy assumes the intentional destruction of previous output. Thanks for clarifying your point.
- zoomzoom 15y agoif cutting taxes went to actual working people, that would be true. cutting taxes even more on rich people and companies leads to higher wealth inequality and not to economic stimulus.
- JeffL 15y agoWhat does reducing wealth inequality have to do with stimulating the economy? (I haven't heard that argument before.)
- achompas 15y agoYes, I'm talking about Keynesian economic stimulus. The economic jury is still out on whether tax cuts or deficit spending are more effective.