Take a look at this great 3-minute video that explains this idea in perfect clarity.
Monday, August 9, 2010
Most of the economic policy over the last several years (yes, including under Bush) has been dominated by belief in a theory promoted by prominent (leftist) economists, like Paul Krugman of the New York Times. This Keynesian idea is that if the economy is stagnant or in a downturn, the government should increase government spending to revive the economy (hello, stimulus!). This idea was shattered (no pun intended) long ago by 19th century French economist Frédéric Bastiat with his "broken window fallacy".