Advancing a Free Society

Stimulating Thoughts

Monday, July 12, 2010

I’ve been thinking about Keynes lately and why it is that everyone just assumes that when government spends money, of course it helps the economy recover and creates jobs.

Let’s imagine four different scenarios.

1. Everyone in America wakes up to find they have an extra $500 in cash in their wallet. (This money is printed by the Fed and elves put it in everyone’s wallet without looking).

2. The government doubles the amount unemployed people receive. (The extra payments are created by printing money).

3. The government hires a bunch of workers to dig ditches and fill them back in. (The money to pay the workers and to buy the shovels comes from printing money.)

4. The government builds a bunch of bridges that are really useful. The money to pay for the cement and the workers comes from printing money.)

Continue reading Russ Roberts at Cafe Hayek