People are socialist by nature

People have asked me over and over, what do I think about the new economic stimulus plan?

My answer is leave it alone. This may be a very overly simplistic view of how we should handle our recession but I feel like it is the correct one.

Even if there was someway to fix this (maybe or maybe not) slide into a recession government is no equipped to figure it out nor have the economic incentives to do so.

On the first day of class in economics I learned the third guiding principle and that is "Incentives matter." When a persons potential benefits go up, it increases there chance of choosing something. if a persons potential costs go down, it decreases it.

Lets keep this in mind and see if you reach the same conclusion I do.

A politician wants to keep his job and keep being re-elected (Benefits up). How does he maximize his "political profits"? He wins votes. How does he win votes? By making people happy.

There are many plans in economics that help people in the short term but not in the long term. Is a politician worried about the long term? Are people educated on economics and worried about the long run?

The answer to both of those questions are no. They becoming an even larger no, when many economists suggest that the politician should do nothing and let the economy rebound. Instead of lightening the effect of the recession in the short term and hurting us in the long term.

People by nature need to be in control…

Like I like to choose what car I drive, where I go, and what I watch on T.V. These are my rightful personal choices.

Then we gain power and we start making choices of our kids, their school and their life.

This is all good and fine, but why do the voters and citizens turn to politicians to fix the economy? We hold our hands out and say if we only told Joe Smith to go make more corn for our ethanol vehicles, our world will be better off.

Well considering Joe is a theatre major, he has no interests of doing so. This is when the controlling central planned socialist inside people kick in. That’s when you tell Joe to work there or you give him money too.

The first policy being the Soviet Union, the second one being a democracy.

Both are shifting comparative advantage to inefficient ways. Both are wrong…

Sometimes I feel like I am the only person that sees this…

Back to short-term/long-term plans that do not work. The classic economic example is the Phillips curve.

Stay tuned for "People are socialist by nature part II"

Specifically looking at the Phillips curve and how it effects the short term and the long run.

Published in: on January 29, 2008 at 5:05 am  Comments (3)  

The URI to TrackBack this entry is:

RSS feed for comments on this post.

3 CommentsLeave a comment

  1. What does this have to do with markets in everything?

    And stimulus packages are a far cry from state socialism…

    I think recognizing communal, social and individual tendencies in people is much more truthful than arguing strict ideology suggesting society must be organized around free markets or central planning and which is better?

  2. Anon:
    The stimulus package is horrible as it does not accomplish what they claim. Landburg has been vocal about this to even discuss it on the news earlier this evening.
    This is his take on it…

  3. […] is my two part take on what I think of most stimulus packages… I and […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: