Posts Tagged ‘government spending’

Have you been watching playoff hockey lately? If you’re Canadian, the chances are you have. You would then have seen those commercials about Canada’s Economic Action Plan. It’s VERY hard to get under my skin, but every so often something comes along that just gets to me. Did you know you’re spending around $95 000 each time that advertisement plays; to be told that you’re spending money on improving the economy?

A while back I wrote a piece on the different ways money is spent, and I encourage you to go through it if you haven’t already. It explains how when you’re not spending your own money for yourself, it tends to get wasted. This is especially true when it’s not your money and it’s not for you, which is called third party spending.

If given that $95 000 to spend, even assuming you can’t spend it directly on yourself, how many people do you think would have chosen to spend it on that advertisement? I’ll bet anything that even the people who spent it on the ads would have spent it elsewhere if given the choice; if it wasn’t set for that campaigns budget by the government.

I recently read an article that showed the government has spent $113 million on these type of advertisements since 2009, that tell us they are doing a good job improving the economy. (more…)

group of doctors wants the federal and provincial governments to tax the rich more, with a misleading slogan of ‘Tax us. Canada’s worth it’

One might ask how this is misleading when they are asking for themselves to be taxed more, but they are really asking for ALL the rich to be taxed more. They make it sound like since they are rich and want to be taxed more, that it is the right thing to do, and that the rich in general agree.

All this really shows is that they don’t have a good understanding of economics. Anyone who has studied Austrian Economics knows that much of the money spent by the government is wasted and not spent efficiently. The article from which I got this information states that the federal government would get 3.5 billion from the plan, with Ontario making 1.7 billion itself. With the way governments spend money, the country would not get 3.5 billion in value, and since we don’t choose how the government spends the money it extracts, it might not even go to the programs the doctors want funded
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During my study of Austrian Economics, it has become very clear how government spending is bad economics. However, when I engaged in conversation with someone on the issue, it has always been difficult to have them understand the rational behind the school when they have not themselves studied the work of the Austrian school. This all changed the other day when I found a simple way that is easy for everyone to understand.

To really understand why taxes are bad, I believe it is important to understand how money is spent. I was listening to a CD about freedom called ‘Freedom Isn’t Free‘, in which Bob McEwan (6 term member of the US congress) was giving a speech. Based on everything I’ve read and heard, I’m going to share that information along with some of my own thoughts.

When you spend your own money on your behalf, you care about two things; the price and the quality. Nobody can make that decision for you as good as you can. Let’s take the example of bananas. When you stand looking at the bananas in the market, you look at the price and make a judgement on how long they are going to last. You also consider if perhaps you will have the nephews and nieces over this weekend because they might go bad.  Not only are you considering the price (you are probably buying them here because this store has cheaper bananas, or it’s cheaper than spending gas to drive further for them) but also the quality. You want to buy the banana’s that will bring you the most satisfaction – like not going bad before they are eaten.

It’s also important to remember here the subjective value theory. It basically says that people value things in different ways, and it is impossible for an exchange to be equal between two persons. For an exchange to be made, person A who has item X must value item Y possessed by person B more than he values item X. On top of this, person B must value item X more than item Y. If A & B gave the same value to the items, there would be no exchange as at least one of them was not gaining anything. In the example above, the buyer of the bananas values those particular bananas more than the money he would be spending.

So when you spend the money on yourself, you spend it at its peak value and, again, no one can spend it like you can. You decide whether you need the shoes, the clothes, etc. This is 1st party spending; something for you, using your money.
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