What LOTR and The Hobbit tells us about economic theory.

In a nutshell, it’s all about churn.

Tax breaks for the rich have much the same economic benefit as giving gold to Smaug. Smaug gets richer, but never spends any gold as he already has far more gold than he can possibly spend for his needs or even for his future needs, so it just sits there doing nothing except being dragon bedding. Likewise giving people who already have too much money than they can possibly spend on their needs more money just results in the money sitting there doing nothing. Taxing that money and using it on infrastructure and social programs results in that money being churned through the economy and growing the economy so that the rich still get the same amount of money, it just has to pass through a few more poor people’s hands before the rich get it, making everyone a little richer.

In order to stimulate the economy you have to develop churn, putting the money in as many hands as possible so that it then passes through as many hands as possible and creates growth. Savings that just sit in a bank or under a mattress don’t create any churn, and “investments” barely ruffle the surface of the water in creating churn. What has been shown to make churn on the federal level has been Food Stamps and infrastructure projects. Food Stamps go from the recipient to the grocery store and pay for the employees at the store as well as the people who transport the food (and other things) and the people that create the food. There are at least 4 stages of economic churn created by Food Stamps that can be easily identified and tracked.

Tax breaks for people who already have more money than they can spend on their needs or even on non-need items like TVs and computers (although I would put computers in the “need to work” category because I use one for work every day) is not the way to grow the economy. I mean how many new cars can one person buy in a year? How many boats? Unless you are out there spending money, you are an economic dead weight no matter how big your checking account is. Rich people don’t create jobs, poor people with jobs create jobs because they are the ones out there spending most of their money. Aldous Huxley had the right idea when he coined the term “conscripted consumption” in the book Brave New World . If you have a consumer economy, you have to get people consuming things to grow the economy.

And because I am not an economist by trade (I am a technical writer who translated jargon into plain English so that people in other fields can understand it) I will let real economists pick it up from here. Go for it guys.

PSA, Opus the Poet

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