Suppose A takes money from B, leaving B poorer by the amount taken. A lacks incentive to spend the money wisely because its not his and, besides, A has his own personal priorities. So then A gives 20-30% of the loot to some other people (C, D and E, whose salaries also depend on taking something from the hapless B) and these three administer the spending of the money. Somewhere between 10 and 30% of the remaining balance of Bs money that C, D and E spend gets wasted on corruption and inefficiency. Ultimately, whatever actually gets spent on what A originally intended gives A a nice photo op to take credit for what he accomplished with Bs money. He uses the occasion to argue that he should be allowed to be so generous again with another swipe of more money from B. The question is: By how much has GDP been stimulated and increased by all this? Is the multiplier 2, 5, 7 or something more? Magic, isnt it?! This is widely taught in what is known as higher education.
Posted on: Wed, 17 Dec 2014 16:49:00 +0000
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