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Thursday, May 07, 2009

Economic stabilization is bad

Here’s a snippet from my article on Mises.org today:

“There is no denying that our economy is undergoing dramatic changes. That brings not just difficulty, but also opportunity for entrepreneurs. In fact, the “creative destruction” of the market is part of what drives economic growth.

Putting aside the causes of our current economic troubles (except to say free markets are not the culprit), we can’t forget that, though massive bubbles are not necessary, markets are by nature dynamic even in the most stable of times. This dynamism is not an evil to be avoided at all costs but the very thing that makes free economies so productive.”


“…growth could not happen without both creation and destruction; it is the driver of growth, not a problem to be solved. If the economy were static — if jobs were never lost, prices never shifted up or down, investments never enjoyed large profits or major losses — we would not live in a stable utopia but a stagnant subsistence economy.”

Read the whole thing here.

Posted by Isaac Morehouse on May 7, 2009 | Permalink


Do Canadians spell it "stabilisation"?

Posted by: IMM | 2009-05-07 2:08:52 PM

I wish there were provisions in the Canadian stimulus package that once the economy showed 3 consecutive months of increasing gdp, all further stimulus expenditures would be cancelled if not already spent.

Posted by: epsilon | 2009-05-07 2:20:31 PM

I wish stimulus packages were declared illegal on general principal. It's theft and it actually results in a net loss in jobs. Gov't deficits for stimulus packages divert savings from the private sector to the public sector. To make matters worse, much of that money is lost to gov't administration costs and politically motivated investments.

Posted by: Charles | 2009-05-07 2:41:05 PM

First you must understand the economy.

Google Money Masters 3 1/2 hour 1995 documentary.



Posted by: Guess What | 2009-05-07 5:50:22 PM

It's not the stabilisation itself that is bad. The government, by existing, acts as a stabilising force. Things like EI, CPP, healthcare, education, infrastructure spending, those activities continue unabated during recession. That is not a bad thing. The bad thing is when governments pi$$ away an extra $40 billion or so in "stimulus" spending... totally unecessary and completely counter-productive. Just keep the damn government functioning... that in itself has a stabilising effect that did not exist during the Great Depression, when government comprised maybe 5 percent of GDP. Now the government comprises 40% or more, and that's more "stabilisation" than even Keynes would have dared dream about. Yet politicians and economists see the need for massive government intervention at the first sign of a slowdown.

Posted by: Raging Ranter | 2009-05-07 9:06:16 PM

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