Reply To: Savings versus printed momey


Of course, but in analyzing social processes one must conceive, as Frederic Bastiat stressed, both the seen and the unseen. If we look only at the seen, then every government subsidy can be justified by the output stimulated by the subsidy regardless of the greater value of the goods not produced by the same resources.

Consider Mises’s metaphor of the master builder. He argues that monetary inflation and credit expansion leads entrepreneurs as a group, like a master builder, to begin to lay a foundation for a building (i.e., the capital structure of the economy) that is much too large to complete given the resources he has. Of course, as construction begins, one could see that resources are shifted into the laying of the foundation. But the alternative uses of those resources in constructing a building with a smaller foundation are not seen since they are not undertaken. Only when the master builder comes to realize that he lacks the resources necessary to complete the larger building that he began to construct does he see that he malinvested his resources by laying to big a foundation.