Saturday, March 21, 2020

Scrooge McDuck In Reverse

Perhaps this is the time to teach, or at least keep as an example, how an economy works, to those who believe that rich people got there by taking money that could have gone to a poor person in a fairer system.  We are in a situation where money is being lost, and it isn't going to anyone.  Some people are not much affected, if whatever their income is based on is not interrupted.  I am considered "essential personnel" and have work.  I'm not sure I actually am essential, but they have to draw the line somewhere, and danger increases if the hospital as a whole does not do what it does. There may be a very few businesses that do better - online entertainments, delivery services.  I can't think of much else.

There will be some pent-up demand that comes upon businesses as restrictions are eased, as folks want to buy cars or go out to restaurants.  But some of the non-buying today occurs because people now do not have jobs that are paying them, and they don't have money to spend.  The restaurants and car dealerships are not going to make that up later.  The money is just gone.  You can frame that as being lost or as being never created, but either way it's just not there. It is relatively easy to destroy value.

I hope the lesson can be turned to show that it is difficult to create value.


Texan99 said...

I'm buying gift cards from local restaurants--cash now for meals later, assuming they survive.

james said...

Or, if the notion that value is hard to create is too hard to understand, at least to understand that losses aren't always due to "theft".

Christopher B said...

One could probably use the experience of an unemployed person and a shuttered business in terms of on-going expenses and loss of income as a way to illustrate why Batista's 'Broken Window' parable is true. This is a disaster without the confounding factor of the need to physically replace equipment or buildings which makes it look like additional economic activity is generated after the crisis is over.