An Elephant in Donkey Land

November 25, 2008

The difference between right and left economic theory

Filed under: Economy — conservativelawstudent @ 4:41 pm
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Normally, when a conservative and a liberal start arguing about economic theory, it ends badly, and both sides are only more entrenched in their opinions than before.  This stems from the facts that they tend to argue the branches of their theories against each other, rather than go back to the place of common thought and argue the first place of divergent opinion.  For example:

If you have 10 people stranded on a desert island, each with $100 American in their pocket.  This means that there is a total of $1,000 on the island.  What is most money one person can make in one year?  A liberal would think that the answer is $900.  They already have $100, and they can only make what everybody else has in total.  A conservative knows this is wrong.  Money isn’t “made” by taking from one, but rather by the circulation of that money.  If Joe gives to Bob to build him a house, now Bob has more money.  Bob then gives to Jim to make him some food.  Jim then gives to Bill to protect his newly found restaurant, and so on and so forth.  The more money that is circulated around the island, the more money they all make, the more moeny they all spend, and each has a quality of life that gets exponentially better.  All of the things stated before can happen instantly, and there is no limit to what each can make.  In theory, each could make $3 Trillion every day!  This is a VERY simplistic way of showing how economics work, but it can be extrapolated to entire countries, like, say, oh, I don’t know, how about the US?  

What liberals want you to believe is that there is only so much money out there, and that to bring up the lower class, one must take from the upper classes and give it to them.  Where they go wrong is that an economy can grow and bring everybody up, including the lower classes, while not arbitrarily lowering another class down.  This is why conservatives are constantly clamoring for lower taxes.  In the hypo above, if there was on Senator on the island, who didn’t produce anything but offered valuable services to the others, the others would have to pay him, most likely in the form of taxes.  Well, if those taxes are too high, nobody has the power to purchase any goods or services from the others, and the economy of the island grinds to a standstill.  It is similar to the US economy — if the government takes too much of the producers money, they cannot purchase any goods or services from others, and everybody suffers.  

Where too many of the arguments that happen go wrong, is that the arguments stem from the higher taxes part of the theory, not the basic divergent theories about wealth creation.  This leads to two people arguing two different points in two different theories, and makes each mad until they just drop the conversation.

I will post more on how the island can teach us about the securities meltdown in a later post.

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5 Comments »

  1. You’re misrepresenting liberals.

    Absolutely, the total amount of money available is irrelevant, but circulation does not equal a healthy economy- production does. If there are plenty of people producing goods, they are generating income for themselves and goods for others thus spurring circulation.

    The problem with your island analogy is that the private loafers are a far greater strain on the whole than public loafers. Half the island is engaged in building a palace for one non-working ‘owner’ while there are barely enough resources or production left over to shelter the rest. The true liberal theory is that the lower classes will be more productive if they’re given a larger slice- thus contributing more to the total. The best way for a lower class person to contribute to the economy is by starting new businesses and improving their worth through education. This is, of course, impossible since the lower class is forced to work 60 hour weeks at Walmart to put food on the table.

    Comment by remistevens — November 25, 2008 @ 5:55 pm | Reply

  2. Good comment. Thanks for the thoughtful ideas.

    One problem with it though is this “if they’re given a larger slice.” Why not go out and earn the larger slice? Why do we need to take from others so they can have the larger slice? I see government as being in place to make sure the skids are greased for them to do so. And, with some exceptions, they have done that. No one is “forcing” them to work at Wal-Mart 60 hours a week. There are plenty of opportunities to take advantage of to get the education to work their way up the chain.

    Again, thanks for the comment. Come back any time.

    Comment by conservativelawstudent — November 25, 2008 @ 10:36 pm | Reply

  3. Hey, i like your comments as well- otherwise i would have kept moving. I find so many people on the internet aren’t worth the bother- especially when it comes to debating ideologies. Law student eh? I’ll bet you took some philosophy as well, love that subject and have taken many courses.

    Here’s the thing, the unfortunate reality for many people is that they do have to work 60 hours. If you’ve had children or health problems etc. . . and started out with nothing- what else are you going to do to survive. Young people starting families or becoming educated are going to rack up debts and once the banks have got you, thats it, you have to keep working like a bugger to keep on top of things. I suppose your not “forced”, you could go on welfare or get assistance or declare bankruptcy, but this is bad for morale and bad for the public coffers. I’m sure we both also agree that expanding these programs opens a dangerous door for the lazy as well.. . ..

    There have been times when the expense of school has driven me to working a 6 day a week job. I assure you my marks suffered dramatically during that period. I was working security, the thing that bothered me most was knowing that the client was paying my security company roughly $40/hr to staff the building with a $10/hr guard. Thats the skid that needs more grease. The lower class is not getting a fair slice of what they are producing, they are “forced” through debts and expenses to continue working for unfair wages, and the rich get richer and richer and richer- while producing virtually nothing at all. Not to mention the massive portion of the wealthy class who inherited their money- these people continue to accumulate wealth never having earned it and never needing to do anything to maintain it. Give dad’s money to a broker, live out your life on a yacht.

    look out brother, ive got you on bookmark now.
    thanks for listening. . . .later.

    Comment by remistevens — November 26, 2008 @ 6:38 pm | Reply

  4. First off, thanks for the bookmark. If there were more people that could disagree with me like you do, politics wouldn’t be the taboo subject it is.

    I only have two quick points:
    1- I still believe that if you “have” to work 60 hours, then you are living beyond your means. Does it suck that someone has to get a small apartment? Yes, absolutely. But does everybody have the right to live in a house or a bigger apartment? No.

    2- I am working my ass off right now so my boys can be those guys you mention about living off inherited money. Maybe they didn’t work hard for that, but I am, and somebody back in the line of the family of the others you mention did too. I don’t want my boys to worry about which bill was not going to get paid like I used to. I think I have a responsibility to teach them where that money came from, and that they still have to earn it in my eyes, but if I can do the tough sledding for them, I will. My Dad worked his ass off so I could have the opportunities that have presented themselves to me, and I would love to take that to the next level.

    3- OK, three points. “The rich get richer and richer.” So do the poor. If you are at the US poverty level, you are among the top 10% of wage earners in the world. Think about that. I’ll post the reference for that stat when I find it again. . .

    I am going to try to keep this blog going regularly, but I have finals in two weeks, so posting my be sporadic at times. I am more worried about Wills, Business Organizations, and Secured Transactions than I am politics at the moment.

    Toronto, eh? Go Leafs Go, except when they’re playing the Red Wings. Nice of them to raise the banner in front of the Leafs so they know what it looks like.

    Comment by conservativelawstudent — November 27, 2008 @ 2:07 pm | Reply

  5. Hey Alright, just getting back on your points. . ..

    1- for the very poor, going to school or opening a business is living beyond your means- it shouldn’t be. I was there, it was either work like crazy or not pay for my classes (living in a small apartment with many roomates).

    2- I suppose you’re right, but we’re working on a gradient scale here. A family like yours sounds like you’re mostly interested in passing down an inheritance in the interest of your children. A good parent should want to provide enough that their children don’t miss out on opportunities, i understand that. My problem is more with inheritances that give the children the ability to wield great power. We’re left with people at the throne of command of giant corporations who have no required qualifications other than their bloodline. Monarchies are an extremely old and inefficient way of determining authority.

    3- Oh man, its got to be relative to cost of living to count. You would be flying high if you made US poverty income but were living in Taiwan. Income disparity is a much more telling statistic of who’s making the most gains.

    Yea, im worried more about other endeavors- but its fun to have it out when there’s time.

    The leafs? Did you know Maple Leaf Gardens is now a grocery store? We’ve all pretty much given up hope.

    Comment by remistevens — November 27, 2008 @ 11:57 pm | Reply


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