Home > Macro/Monetary Theory > Still More Broken Window Economics

Still More Broken Window Economics

Here is a simple explanation of the Keynesian view of “broken window” stimulus.  It makes perfect sense and I agree completely with it (although there is an important distinction between the “economic activity” of a society and the wealth of a society).  But this argument (as all similar arguments I have heard) leave a gigantic question on the table that nobody seems to be talking about.  Why are there so many unemployed subsistence farmers?   In fact, this difficulty is so pervasive that it is inherent in the setup of this example.  After all, a subsistence farmer does not need the wealthy loaner to have work, they work for their own subsistence.  But let’s ignore the reality that a man always has himself (or each other) as the employer of last resort and assume that they do need the rich guy in order to have anything to do.  Maybe he owns all the land and resources that could be used to produce the conveniences and necessities of life.

In this scenario, the peasants represent a resource.  They could be producing things of value to themselves and the rich guy.  Knowing this, why would the rich guy allow them to be idle and starving to death?  By assumption this guy owns land or resources that they could work in order to produce something.  Presumably they would be willing to work on his land to produce something if they got to keep some of it.  Presumably they would be willing to work for less than the full amount that they could produce using his land and/or other resources.  And presumably he would be willing to let them work his land in return for some portion of their produce rather than let the resources (land and labor) go to waste right?  Or is that the rub?  See, this premise seems to assume that the rich guy is completely satiated, that he has no desire for any more stuff.  And not only does he have no desire for any other stuff but he would rather not have any other stuff and he prefers to watch all the peasants starve rather than make any use of his wealth because if he were satiated, he could still let them work and keep all of their produce.  This would make him no worse off, unless of course he just likes to see them suffer.  In this case a hurricane is only a device that undoes the satiation of the rich guy and allows the economy to work again.

So once again we have a model that begins by implicitly assuming there is no scarcity, at least for the rich guy.  Or could there be another reason that there are so many people/resources lying around going unused despite their obvious productive capabilities?  What might account for that?  What if there were a minimum wage that were higher than what they could produce?  Or a union that had the ability to keep them from working for such a low wage?  Or what if the rich guy had to pay taxes and social security and unemployment and medicare and pension and workers comp and liability insurance and hire a lawyer to help him comply with all relevent regulations every time he wanted to hire a peasant?   That would probably have some effect right?  But all that isn’t even the main reason.  The main reason is much more unspeakable than that.

  1. September 6, 2011 at 10:39 pm

    “The main reason is much more unspeakable than that.” Are you leaving me with a cliff-hanger? I want to know what you think the main reason is.

  2. Free Radical
    September 7, 2011 at 2:30 am

    If you read my other posts carefully enough it will be clear (=.

    …Plus I’ll write more about it later, I’m sure.

  3. Free Radical
    September 7, 2011 at 2:31 am

    Oh yeah, and that’s the whole point of a cliff-hanger! If I just told you it would ruin it.

  4. September 7, 2011 at 4:07 am

    Central bankers control the federal government through the Federal Reserve system. With the power to print money and no checks or balances on its power it can print money, and then give it to whomever it wants. Thus it can directly redistribute wealth to whoever it wants. Is that what you are going to say in your next post?

  5. Free Radical
    September 7, 2011 at 4:41 pm

    Not exactly but you’ve got the target right. It’s more subtle than that though (although that is true).

  6. W. Knowlton
    September 8, 2011 at 7:37 pm

    Mmm, I read them carefully and it’s not that clear. Hurry up with that next post, since your schedule is cleared.

    • March 5, 2013 at 5:07 pm

      hey there little lady, why don’t you turn aonrud and show me your lower east side.. and the woman’ replies in a man’s voice sure then quagmire says whoa transvestite, back off ! .. what a minute .. pre-op or post-op? the woman’ replies: pre-op and quagmire says whoa transvestite, back off !! and ANYthing Stewie says is always funny !! like for example. : well id love to stay and chat but you’re a total bit*ch that is sooo funny !!!!tons of study time wasted on facebook, which is better than myspace

  7. Free Radical
    September 9, 2011 at 4:36 pm

    Cleared? I don’t know what you’re talking about, but I will try to get to it soon. Maybe today… It may not be that obvious once I write it anyway though we’ll see.

    • January 25, 2014 at 12:59 am

      I am currently finsihing up my BA in Child Development and Family Studies and thus far I have only work with children from 2 weeks to adolescent while helping support their families. The Physician that I would want to work under is an Obstetrics (OB) because they are in direct contact with pregnant women and their children during pregnancy. I would choose this particular specialty for a variety of reason such as having the opportunity to see individuals become parent for the first time, seeing how much love is surrounded in the process, being there to help the mothers while there in a vulnerable state. One of my main reasons is because I think that the whole birthing process is fascinating and to be able to be a part of family’s lives while going through this process, I imagine to be extremely rewarding.A of physician specialty that I would least want to work with would be a psychiatrist. Although I believe that psychiatrist do some spectacular work and help a lot of people through difficult situations I personally believe that this job would be to emotionally draining and overwhelming for me. This makes me question whether or not I would be able to handle it. When I set out to do a job my goal is to do the best that I can and I don’t feel that I could successfully do this job to the best of my ability.

  8. W. Knowlton
    September 12, 2011 at 6:11 pm

    Cleared – as in more open because you obviously weren’t busy visiting anyone awesome in Seattle that day ;-). Anyways, we’re still waiting.

  9. September 13, 2011 at 2:25 am

    Yea, you need to hurry up and post the next one. It’s been a long time.

  10. Free Radical
    September 13, 2011 at 6:06 pm

    I know I’ve been trying but it’s hard, I’m trying to think of a new way to explain it that will suddenly cause it to make sense but it’s very complicated.

  11. September 18, 2011 at 3:01 am

    Hey. It’s been a long time. You can explain it even if it is complicated. Put one up! I’ve literally been waiting to read

  12. Free Radical
    September 19, 2011 at 4:45 am

    haha ok ok, I’ve been writing it but it keeps bringing up more questions I’m not sure how to answer. I’ll give you something though just to keep things moving along.

  13. March 6, 2013 at 3:29 am

    I love this show My favorite scene is where Stewie is painlyg basketball and goes off on one of the other players. Dont be talkin trash up in here ..this is MY house!! ANDStewie speaking to Lois: You there! Wipe my bottom .one finger, circular motion ..and don’t you look at me!!! Oh, and who could ever forget Stewies Rocket Man performance?????tons of study time wasted on facebook, which is better than myspace

  1. December 20, 2011 at 2:37 am

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