Dear WSJ: Economic Snake Oil Not Stimulating
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
Brian Riedl is correct: economic-stimulus packages are economic snake oil ("Why Spending Stimulus Plans Fail," Nov. 14). Because money given by government to Jones MUST be taken from Smith, Jones's extra spending is offset by Smith's reduced spending. The great 19th century French economist Frederic Bastiat explained the matter brilliantly in his essay "What Is Seen and What Is Not Seen:"
"In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
"Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil."*
Washington is infested with bad economists.
Donald J. Boudreaux
Don Boudreaux is the Chairman of the Department of Economics at George Mason University and a Business & Media Institute adviser.