Economic Theory?


Diabloii.Net Member
axeil said:

Well this thread got hijacked but it's cool; finally a debate in the OTF not centered on calling each other names for being a Republican/Democrat.
You just had to go and jinx it didn't you?
Garbad_the_Weak said:
I am too old for that bull. Seriously, I want to know.
OK, I'll try.

In any proffession or trade, you have apprentices and journeymen. Apprentices usually have a time factor and a list of accomplisments as a pre-requisite to become a journeyman. Life is no different. It just isn't cut and dried, and we dont get a merit-badge. We get wrinkles and aches and pains.

Have you ever been passed over by a client for a more experienced mouthpiece? (going by your posts in this forum you are an atty in your late 20's) Kinda the same thing.

Garbad said:
I won't argue with you no matter what,
That, Sir, is the stuff that comes out of the south end of a northbound bull.

Old saying;

"You have to be young and dumb, before you can be old and wise."

There are exceptions to every rule, of course. Wisdom is not automatic, and opinions are subjective.


Diabloii.Net Member
I was sitting in Psych the other day and a thought occured to me. Capitalism is based on the transfer of goods and services for something, whether that something is money or another good or service.
All economic theories start from the same basic assumption; a scarcity of goods. In fact, Economics could be described as the method used by a society to allocate scarce goods among its members.

Capitalism uses the pricing system to allocate these goods. Most others use societal force to determine the allocation of these goods, whether it is the Government, a religious organization, or even a group of “expertsâ€.

But the system becomes inefficient when people save extensively and spend very little.
Not really. There are inherent inefficiencies in a Free Market that have to be considered such as externalities, public goods, monopolies, and a lack of accurate information about the goods being traded.

Savings doesn’t hurt a capitalistic economy. Savings implies that the excess money a person has will not lie dormant but will be used to generate additional income through such things as interest payments. Hoarding (stuffing your savings under a mattress or in a safe) could be a problem, but it is a rare person who does this any more.

Where do you think tax money goes?

The government hires people to do work. Those people take their paychecks home and spend them.
You have to realize that every dollar that is spent by the Government is one less dollar that is spent by the private sector. And since the Government is a monopoly (an inherent Market inefficiency), the chances that Government spending is better for the Economy than the same amount being spent by individuals is slim and none.

There is a famous economic story about a mayor of a town that is burdened with a high unemployment rate. He decides to hire some of the unemployed to go around breaking windows throughout the town. His logic being that not only will the window breakers have a job, each broken window will generate more business for window repairmen, garbage collectors, hardware stores, etc.

What he fails to consider is that every dollar spent by a building owner on fixing the broken windows is one dollar less spent on other things. They may have to cut back on advertising, hire one less clerk, refrain from buying new clothes for the family, or even raise the prices of their goods to make up the difference. All of this money which would have affected the Economy in an myriad of different ways is now focused inefficiently on one activity.
Government spending is defined in macroeconomic terms as "expansionary fiscal policy." Expansion meaning total economic output.

SparkNotes said:
When the government spends more on goods and services, the population, which provides those goods and services, receives more money. Thus, expansionary fiscal policy makes the populace wealthier and increases output, or national income.

The other form of expansionary fiscal policy is lowering taxes.

Let's delve a little deeper though.

SparkNotes said:
When the government increases purchases, it directly increases output, or national income. But, there is a greater effect than just the actual amount of increase in government purchases. When the government spends more, the populace receives more. That is, because the population is the target of increased government spending, personal incomes, and thus consumption, increases.
Later on, an illustration of the money multiplier:

SparkNotes said:
The second example we will work through deals with government spending policy. What is the total change in output from an increase in government spending equal to $20 million if the MPC is 0.8? To solve this, simply plug these numbers into the government spending multiplier: (change in government purchases) / (1 - MPC). This becomes ($20 million) / (1 - 0.8) = $100 million. A $20 million increase in government spending will cause a $100 million increase in output. When government spending increases, the populace, as the recipient of this spending, has more disposable income. When consumers have more disposable income, they spend some and save some. The money that they spend goes back into the economy and is saved and spent by somebody else. This process continues.
So, in fact, government spending does indeed help the economy. By the way, there's also this thing called deficit spending. In moderation, it can be good for the economy (though in excess, it can devastate an economy--the question always is how much of it is a good thing).
Garbad_the_Weak said:
Proving government spending trickles down doesn't mean government spending trickles more than private spending.

Never said it did--just saying that paying taxes isn't throwing your money out hte window never to be seen again. Someone back in the thread made it sound like paying taxes was like sending your money in an envelope to China.

At any rate, to play devil's advocate, I'm not sure how hiring more janitors to clean the Ronald Reagan building or paying a few more security officers for the Capitol building is really trickle down economics. You don't get much lower on the food chain than the middle-lower-class workers.
Fair 'nuff. Don't get me wrong, I'm not all for government spending out the wazoo, I grind my teeth when someone cries that their tax money is up in smoke. Someone has to pay for this darn government, and you can't tell me we'd be better off without it entirely (unless you're an anarcho-syndicalist, in which case I'm scared of you).


Diabloii.Net Member
I am not taking a stance, just pointing out that issue.

And I doubt anyone thinks the money totally poofs, but rather they get less than they pay and/or they believe the free market it more efficient.