With the $5 left over they help employment in any number of other industries in the United States.But the results do not end there. But they contend that this will be more than offset by the added production brought into existence by the borrowers who pay back, and even by most of the borrowers who do not pay back.This argument will seem plausible only as long as we concentrate our attention on the particular borrowers whom the government supplies with funds, and overlook the people whom its plan deprives of funds.

The difference is that more people are made happy as consumers, and that production is going more into essential goods and less into luxuries and superfluities.This last point is one that often gives Benjamin concern. We have already seen how this actually happened historically with stockings and other textiles.But the new employment does not depend on the elasticity of demand for the particular product involved. It would almost seem as if no country is capable of profiting from the experience of another and no generation of learning from the sufferings of its forbears. When money incomes of group C have increased only 10 per cent, however, prices have already gone up 15 per cent. Certainly if under such conditions my particular crop of oranges is no larger than usual, then I am certain to lose by the lower price brought about by general plenty.And what applies to changes in supply applies to changes in demand, whether brought about by new inventions and discoveries or by changes in taste. For we may define “savings” and “investment” as constituting respectively the supply of and demand for new capital. For depth in economics consists in looking for all the consequences of a policy instead of merely resting one’s gaze on those immediately visible.In the course of our study, also, we have rediscovered an old friend. On the assumption that inflation affected everyone and everything evenly (which, we have seen, is never true), it would be tantamount to a flat sales tax of the same percentage on all commodities, with the rate as high on bread and milk as on diamonds and furs. Who subsidizes the consumers will depend upon the incidence of taxation.

That is why the banker makes him the loan. )On the subject of the tariff we must keep in mind one final precaution. And to many the conclusion seems obvious that if the government merely issued more money and distributed it to everybody, we should all be that much richer.These are the most naive inflationists. So that while labor might get a broader slice of a smaller pie, during this period of transition and adjustment to a new equilibrium, it may be doubted whether this would be greater in absolute size (and it might easily be less) than the previous narrower slice of a larger pie.This brings us to the general meaning and effect of economic equilibrium. For Paul H. Douglas in America and A. C. Pigou in England, the first from analyzing a great mass of statistics, the second by almost purely deductive methods, arrived independently at the conclusion that the elasticity of the demand for labor is somewhere between -3 and -4. The bestselling IB Diploma course book for Economics has been revised and updated in line It was applied first of all, in fact, in the allocation of raw materials to producers.The natural consequence of a thoroughgoing over-all price control which seeks to perpetuate a given historic price level, in brief, must ultimately be a completely regimented economy. The glazier will be no unhappy to learn of the incident than an undertaker to learn of a death. We destroyed the foreign market for our cotton. Prices are determined by supply and demand, and demand is determined by how intensely people want a commodity and what they have to offer in exchange for it. This figure greatly overstates the amount of net saving that has occurred historically in the United States,Now as a result of this annual saving and investment, the total annual production of the country will increase each year. All that is necessary is for the government to spend enough to make up the “deficiency.”An enormous literature is based on this fallacy, and, as so often happens with doctrines of this sort, it has become part of an intricate network of fallacies that mutually support each other. When at last disinterested writers recognize that the danger of the scheme’s enactment is real, they are usually too late. My third debt is to Ludwig von Mises. This may of course happen for short periods or in special circumstances. The government must act. It is true that a particular group of bridge workers may receive more employment than otherwise.

The second consequence is to reduce the supply of that commodity. For the moment the nation seems to have got something for nothing.But now, in accordance with our lesson, let us look at the longer consequences. Inflation is the auto-suggestion, the hypnotism, the anesthetic, that has dulled the pain of the operation for him. Some suffer more than others. They would make a relative gain, and other elements in the population would suffer a relative loss, during the period of transition. Whichever he does, the transaction cannot be completed until the American exports have been paid for by an equal amount of imports.The same situation would exist if the transaction had been conducted in terms of American dollars instead of British pounds. But this increases the supply of that commodity at the same time that it reduces the supply of some other commodities. If capital invested at home pays them less than that invested abroad, they will invest abroad.

And the political support for such policies springs from a similar confusion in the public mind. As they begin to think of this they elaborate upon it.

When people want more of an article, they offer more for it. His conscience sometimes troubles him even about the $25,000 he spends. As these are likely to consist for the most part of workers, they will simply have their real wages reduced by having to pay more for a particular product.

Because his bathroom leak has been repaired at double what it should have cost, he decides not to buy the new sweater he wanted. They must pay part of the taxes that are used to support the X industry. It would lead to favoritism: to the making of loans to friends, or in return for bribes. A local of the teamsters’ union required that every truck entering the New York metropolitan area have a local driver in addition to the driver already employed. The real cause is either a scarcity of goods or a surplus of money.

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