Friday, March 27, 2009

Deadweight loss

Deadweight loss - definition:

In economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal. In other words, either people who would have more marginal benefit than marginal cost are not buying the good or service, or people who would have more marginal cost than marginal benefit are buying the product.

Causes of deadweight loss can include monopoly pricing (see artificial scarcity), externalities, taxes or subsidies (Case and Fair, 1999: 442), and binding price ceilings or floors. The term deadweight loss may also be referred to as the "excess burden of monopoly" or the "excess burden of taxation".

My thesis is that deadweight loss is a huge part of GDP, and I will speculate on who is responsible.

First, GDP stands for Gross Domestic Product, but that's just a fancy word for how much money has been spent. GDP measures spending/income. What it doesn't measure is how much of that spending is done on credit. Therefore it doesn't measure how much debt is in the economy. Therefore it's an artificial measure of prosperity and economic growth in this context doesn't mean much.

Second, alot of the spending goes to a deadweight loss. These are the deadweight losses:

*Lawyers - lawyers don't produce anything of real value, yet they make obscene amounts of money.

*Doctors - the ones who write out prescriptions, make diagnoses and recommend treatments. No service of any real value. Again, make obscene amounts of money.

*Bureaucrats - produce no value at all and waste everyone's time. Funded by taxpayers and a legal monopoly, their main function being to administer the bureaucracy. Including police and military, who are the enforcement arm of the bureaucracy.

*Politicians - paid to lie and lie and lie and lie........... etc.

*Bankers - make loans backed by nothing.

*Mega-Corporations - the ones that take control of natural resources and control the prices, influence government to make favourable regulations, globalise their resources to drive out all the local competitors, etc.

Just imagine what the world would be like if these parasites were gotten rid of.



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