Scott Adams has a post up on his blog entitled “What’s Wrong With the Economy“. It’s not bad, but it rather misses the point. Please go read it, and when you return, I’ll explain why.
Wealth
An economy produces wealth to the extent that it takes less-valuable inputs and turns them into more-valuable outputs. The more of this activity that takes place, and the bigger the difference between the values of the outputs and inputs, the better the economy is doing.
Waste
The examples Adams cites are, indeed, “what’s wrong with the economy”, but in a very immediate sense. In the first case, the following resources (my estimates) were wasted:
- 1-2 hours of Adams’ time
- 15-30 minutes of Comcast tech support’s time
- A new remote
- Some portion of the overhead of a Comcast retail location
In the second case, the following resources (my estimates) were wasted:
- 15-30 minutes of the boss’ time (yelling at his employees, arranging for maintenance support)
- 4 man-hours of lost employee productivity, due to griefing from the boss
- 1 refrigerator
Please note that these resources weren’t merely used inefficiently – this isn’t a question of cost/benefit analysis, in which we need to weigh the value of the inputs and the value of the outputs – this stuff was simply thrown away.
The Lesson
This waste is the problem – not the fact that the people involved will be depressed, or not spend. The problem is that resources are being thrown away, destroying wealth. This point is important, because the waste in both stories could be spun as “economic stimulus”, if only the government borrowed some money and paid for it all. But it would still be stupid, and still be “what’s wrong with the economy”.
Whenever someone advances a plan to “stimulate” the economy, ask yourself a simple question: “Will the plan increase the difference in value between the economy’s outputs and its inputs?” In other words: “Will the plan encourage people to create wealth, or just increase output, irregardless of the costs?”
