The Economics of RedistributionIt's too bad I lost my job. But it's lucky you, my neighbor, own a grocery store. So you give me a bag of groceries. A simple act of humanity, the kind of thing that happens all the time. Thanks! A simple act, but really a little too simple for our purpose here. We have to go a step further to call it "economics." So instead of giving me a bag of groceries, you give me $100. Now, with $100 in my pocket, I can choose my own groceries, and maybe even include a small toy for the kids. It's still pretty simple, but now something has happened at your grocery store. Sales are good, but profits are down. Of course this is because your cash register rings up a sale to me, but the money I pay you with was yours in the first place. Your own money is going around in a circle, but when it went through the cash register your books started to look funny. Let's take things a bit further. You don't give me $100, you give me $1,000. I'm still buying groceries from you, so your cash register sales are still good. But your profits are still going down because I'm paying you--to call it that--with your own money. Sadly, I also find my car in need of repair. I can't keep looking for work without a car, so I have the repair made. I pay the mechanic with the money you gave me, of course, since I'm still out of work. The mechanic buys groceries at your store too. So now the mechanic, like me, is paying you with your own money. Your sales at the cash register keep looking good, but profits are in a nose dive. Your accountant is starting to worry. Let's take your generosity a step further. You don't give me $1,000, you give me $5,000. Good thing, because I'm OK taking showers without hot water, but I can't ask that of my wife and kids. The plumber soon sets things right. As I'm sure you've already guessed, the plumber buys groceries at your store too. So now he too is paying you with your own money. You can see where this is going. At some point half the people in town will be paying you with your own money. Your sales are astronomical, but your profits are below zero. By now your accountant is calling you frantically every 30 minutes. He's also trying to think of something to tell the wholesalers you haven't paid because you're giving your groceries away. At the same time, the unpaid wholesalers are trying to think of something to tell the unpaid packing plants, and the unpaid packing plants are trying to come up with a story for the farmers, also unpaid. While all of them are trying to explain to the truck driver how he's supposed to buy fuel for his truck when nobody is paying him. This is taking things to the extreme, of course, almost to the point of fiction. It doesn't really happen that way...right? Maybe right, maybe not so right. Let's look a little deeper. It could be this is only the tip of an iceberg. Part 2 (in the works) – USofStupid.us – | 