FT152: “Liberals who expand the welfare state tell us not to feed wild animals because it makes them dependent on handouts.” —Old Pithy

Posted by PITHOCRATES - January 11th, 2013

Fundamental Truth

Before there was Money People Traded Things they made with their Human Capital

Which came first?  Money?  Or stuff to buy?  Was there stuff in a store before someone walked in with money to buy it?  Or without anyone having any money to buy stuff would a store owner stock his or her shelves with stuff no one could buy?  It’s a regular chicken and egg question.  Liberal Democrats would say money came first.  Because they believe in Keynesian stimulus spending.  Put more money into people’s hands and they will buy more stuff.  Thus stimulating economic activity.

But if money was all that we needed to stimulate economic activity the government could just print money and hand it out to the people.  Who will take that money and go to the stores to buy stuff.  But here is where the illusion of money creating economic activity ends.  If the government just printed money and gave it to the people no one would have to work.  Which is everyone’s earnest desire.  This is why people buy lotto tickets.  To get money to spend without having to work anymore.  But if no one worked anymore because they could get money from the government printing presses instead of getting it in a paycheck in exchange for work what would these people buy?  If no one had to work anymore who would make the stuff we find on store shelves to buy?  Of course no one would.  So those store shelves would be empty.  And with nothing to buy all the money in the world would be worthless.

So this isn’t a chicken and egg question.  Stuff to buy came long before money appeared on the scene.  Before money people bartered.  They traded things for other things.  Meaning that if you wanted something that you didn’t have you had to create something yourself to trade.  This is barter.  People with human capital (talent and ability) create something they are good at.  They create more than they need.  And take their surplus to meet other people to trade with to get those other things they want.  Things other people made using their human capital.

Search Costs made the Barter System Costly and Inefficient

Money was a solution to a problem.  As the economy got more complex with more things to trade it got more difficult to find people to trade with.  If you made product A and wanted product B you had to find someone who made product B who wanted product A.  Imagine you make vacuum cleaners.  And you want a television.  You go to market looking for people to trade with.  Let’s say you find 3 people who make televisions.  But none of them want a vacuum cleaner.  So you would have to go to another market.  And find other people who made televisions.  Until you found one that wanted a vacuum cleaner.

This time spent trying to find someone to trade with is called search costs.  Which made the barter system costly and inefficient.  For all of that time spent looking for someone to trade with was time not spent making vacuum cleaners.  Giving you less to trade with.  Allowing you to trade for fewer things.  One way to reduce search costs was to bring a third trader into the picture.  Someone that wanted a vacuum cleaner but made smartphones.  Not televisions.  If a television maker wanted a smartphone you could trade a vacuum cleaner for a smartphone.  Then trade the smartphone for a television.  Making barter a little more efficient.  By reducing search costs.  But it could still be very difficult to find three people to trade with.

This is where money comes in.  It serves as that third trader.  You would simply trade your vacuum cleaner for money.  Then trade your money for that television.  Greatly simplifying trade.  By removing half of the trade equation.  All you had to do was to find what you wanted.  And then trade your money for it.  You didn’t have to worry about what the other person wanted.  Because once they got your money they could go and trade it for whatever they wanted.  Money makes trade easier.  As long as it was something that could hold value.  A handful of dirt was not good money because anyone could scoop it up from the ground.  Gold, on the other hand, was very good money.  Because it was very difficult to get gold out of the ground.  Thus it was scarce.  As well as being durable, divisible, fungible, etc.

People Today share their Every Thought on Social Media for Validation that they Matter

Based on this let me ask you another question.  Does Keynesian stimulus spending end recessions?  No.  Because giving people money to spend allows them to spend that money without creating something of value first.  And creating more money out of nothing makes money less scarce.  And less valuable.  Like picking up a scoop of dirt from the ground.  You create too much money and people will return to the barter system.  Because something they create with their human capital will have far more value than a continuously devalued dollar.  Best of all, in a barter system there can be no Keynesian stimulus spending.  Because there is no money.  And no inflation.  Making Keynesian stimulus spending impossible.  For there will only be people creating things with their human capital to trade with other people doing the same.

Those in government, though, don’t give up their Keynesian ways.  For they like spending money.  And being able to create it out of nothing allows them to spend a lot.  Which gives them a lot of power.  By getting people dependent on government benefits.  For once they are they keep voting for those who promise to give more.  And for those who promise not to reduce their current level of benefits.  Allowing a lot of people to withdraw from half of the economic equation.  Instead of using their human capital to bring value to market to trade for other value they let their human capital wither away.  Giving them little reason to get out of bed in the morning.  For when it comes down to it, people want to have a purpose.  They want to matter.  Which is why people today share their every thought on social media.  For validation that they matter.  For others to acknowledge that what they think and say is smart, funny, witty, insightful.

Wild animals are beautiful creatures.  We are attracted to them.  And would like to approach them in the wild.  To gain their trust.  We sometimes feed them because we want to help them.  Because life in the wild is no picnic.  It’s hard.  Brutal.  And these animals are just too cute to suffer.  But the Left frowns on this.  They don’t want us to feed the animals.  For if we make them dependent on us they will never be able to return to a normal life in the wild.  They won’t be able to live without those handouts.  The Left understands this.  Yet they have no problem with making people dependent on government benefits.  Giving them no reason to get out of bed.  Destroying the economy in the process.  Making it ever harder for these benefit recipients to return to the workforce.  Leaving them no purpose in life.  Save one.  To vote Democrat.

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