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Saturday, October 05, 2013

 
Great Minds Think Alike

In January 2011, Chicago Boyz contributor Shannon Love posted an article titled “The Man is Hiding the Stash” Fallacy. She proposes this name for what she deems "the central economic fallacy of leftists in general." Redistributionists notoriously assume that there are vast reservoirs of "stashes" held by The Rich sufficient to fund their wildest redistributionist schemes. Fiscal leftists view The Rich as hoarders, when in fact they are, by and large, investors.

[T]here is always the implicit idea that somewhere there is this big pile of money that the rich business people are hoarding away like a squirrel with its winter store of nuts. Leftists tell everyone that all problems can be solved if we just use the force of the state to threaten the squirrels to give up their nuts.

The problem is that rich people don’t own a lot of nuts, they own nut producing trees, i.e., rich people don’t have a stash of cash, they own assets that can, if managed properly, produce a stream of income. Worse, for the leftists, those assets usually provide jobs for the majority of the population, so you really can’t alter their use too much. If you cut the tree down to get the nuts, what are going to eat next year?

For some time I pondered that very fallacy. As i mentioned in comments, I had coined a different term: the Scrooge McDuck Fallacy, with the avian one-percenter's legendary vault in mind. He has a great income, and much of it leaves the economy for the confines of his vault.

I discovered that I'm not the only one who dubbed that principle the "Scrooge McDuck Fallacy." Last year Charles Orton-Jones's article on BBC financials flummery trots out the phrase. And in 2005 the fallacy is the title subject of this post at the Occam's Razor blog.

There's one way Scrooge's vault could be realistic: change the banking rules so that banks can store fractional reserves in private residences, and in the form of gold coin, jewelery, statues, etc. The stash goes back into the economy through lending. Of course, keeping tabs on their worth would be a pain on the accountants. But how many accountants get to do their jobs while swimming in rubies?

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