As economist Wilhelm Röpke put it, “When demanding assistance from the state, people forget that is a demand upon the other citizens merely passed on through the government, but believe they are making a demand upon a sort of fourth dimension which is supposed to be able to supply the wants of all and sundry to their hearts’ content without any individual person having to bear the burden.”

It is as if the state has become an entity that owes us all a living, and its ability to provide that living is almost magical. Individual’s expectations of what the state can do seem to belong more in a Harry Potter novel than reality. As English historian T. B. Macaulay put it, “it is supposed by many that our rulers possess, somewhere or another, an inexhaustible storehouse of all the necessaries and conveniences of life, and from mere hardheartedness, refuse to distribute the contents of his magazine among the poor.”

In reality, we all live in a world of scarcity. Everything we do has trade-offs. This is why Milton Friedman said there is no such thing as a free lunch. When a resource is used in one manner, then the next highest valued use, or the opportunity cost, is given up. Who pays for the goods and services we have in this life, no matter how essential to our lifestyles, is not irrelevant. How resources are allocated is also not irrelevant. If one does not pay for something, but gets it provided nonetheless, then there is a good chance that good will be overused and wasted, and this is no accident.

Sending other peoples money is easy. Why should you care how much it costs as long as you can get the highest value out of what you get? And when we spend other people’s money on other people, we again, don’t care about the cost but also put much less concern into the value others get out of it. In contrast, when we spend our own money we typically want the highest value for the lowest cost we can find. This is why a world in which the consumers foot the bill is more likely than not going to be more efficient and wealthy (and even for the least well off).

The common belief in what the government can provide is indeed a delusion. There is no forth dimension. The government’s ability to provide so-called essentials comes at a cost and is typically very inefficient. If we leave the responsibility to the individuals, the world will work much better than most seem to think. Remember, this is not an argument against charity. There is nothing wrong with voluntarily helping those in need. But a world where individuals are forced to provide for others is unsustainable. We must abandon the fantasy that the state operates outside of constraints and scarcity. We must wake up to the reality, whether we like it or not, that prosperity is created by the desire of man to improve his own lot in life. And, in general, this requires personal responsibility.

Download Henry Hazlitt’s “The Fourth Dimension” here.

Yes, the Federal Reserve and the Obama administration have pulled us “back from the brink” — the title of a new paper by Christina Romer, who leads the Council of Economic Advisers. She argues convincingly that expansionary policy saved us from a possible replay of the Great Depression.

But while not having another depression is a good thing, all indications are that unless the government does much more than is currently planned to help the economy recover, the job market — a market in which there are currently six times as many people seeking work as there are jobs on offer — will remain terrible for years to come.

As if on cue, the Times editorialized two days later:

If successful, ambitious goals like health care reform and energy legislation may generate jobs, but officials have not persuasively linked them to job growth. Congress and the administration also have not done enough to directly create jobs. That could be done with more stimulus to spur job creation, or a large federal jobs program, or tax credits for hiring, or all three.

The truth is elsewhere. First and most important, the economy continues to shed jobs more than two years into the recession because government has increased the burdens private firms and individuals must bear. From tax increases to a gaggle of new rules and regulations to the bailouts, government has done nearly everything it should not be doing if it wants a real recovery to take place.

Second, it is clear that the politicians in Washington are just getting started. From the appointment of numerous “czars” over different sectors of the economy to the “ambitious” plans for remaking medical care and imposing huge new environmental burdens, it is clear that President Obama and Congress believe that the economic downturn is an excuse for an upturn of State control of our lives.

If there is any “recovery,” it is a false recovery, one based not on any tangible economic progress but rather on financial trickery and printing money. Our “recovery” is a fraud perpetrated by Washington and its Amen Chorus in elite higher education and the mainstream media.

For the U.S. economy to have a real recovery, the economy first must shed the huge number of malinvestments that piled up like garbage on New York streets during the last unsustainable boom. Unfortunately, as the economy dumps these failed investments, that means people who were employed in those areas also lose their jobs, which simply is unacceptable to the political classes.

Had the Bush and Obama administrations left the economy alone, those malinvestments would have been shed quickly and the economy now would be moving toward a real recovery that could be sustained over time, employing new people in those sectors. Alas, the political classes believe that “inactivity” is anathema, so Bush and Obama engineered hundreds of billions of dollars of “bailouts,” which have served to prop up whole sectors of failing enterprises.

What does that mean, economically speaking? It means that instead of being directed into those sectors that could have grown without aid from the government, resources are being shoveled into the economic equivalents of bottomless pits. Americans are forced to prop up domestic automakers that are bankrupt, keep zombie financial institutions going on life-supports, engage in energy policies that literally destroy wealth and produce less energy, and to be taxed even more so government can destroy the part of the medical sector it has not already ruined.

In other words, Americans in productive entities are being forced to give up a large chunk of their own wealth o prop up firms and institutions that might be bankrupt but also are politically connected. While the New York Times and its elite economists in tow might claim the government needs to continue this course with another “stimulus,” commonsense economics is telling us that this is a policy that benefits the political classes and their allies and no one else.

In a rational political and policy environment, the implication of all this [the fading economy] would be clear: we need more stimulus. Yes, it would add to federal debt — but isn’t that worth doing to help reduce an output gap that’s wasting our potential at the rate of more than a trillion dollars a year?

The “solution,” Krugman says, is for government to create more debt and print more money.  Since he already publicly claims the printing of money creates a “free lunch,” he would approve of nearly any way the money appropriated by Congress would be spent, just as long as there is spending.

Lest anyone think the “stimulus” is spent wisely, think again.  One building block of economic analysis is “utility theory” in which people rank their preferences from highest to lowest.  For example, while I might want to take a vacation, it is more important that I spend my income first on my house payment, then food and other expenses that will support my family.

If there is money left over, perhaps then I can take my trip.  Likewise, when we want governments to spend money on various projects, we assume that the most important items will be first in line.  (One can make a case that just about all government spending is foolish and reckless, but for purposes of this article, I will assume that at least some government spending has social value.)

According to the promoters of the “stimulus,” the money has gone to hard-pressed states and localities to fill in the gaps caused by declining tax revenues.  In some places this has meant that lower-valued projects have been abandoned or put on the back-burner, which fully reflects the human valuation process.

If the “stimulus” were about helping states and localities through hard times, the government would want them to spend it on the most-important projects, or perhaps even hold that money in reserve to ensure solvency through the recession.  Instead, Congress has directed that money be spent on things that local and state governments would never consider to be priorities.

I have to do nothing more than drive to work to see this foolishness in action, as two “stimulus”-funded projects are in my backyard.  I live in Garrett County, Maryland, and have to drive over Big Savage Mountain, a 3,000-foot-high ridge, to go to Frostburg State University, which is five miles east of my home.  If I take U.S. 40 over the mountain, I often have to stop and wait for several minutes while work crews expand the drainage ditches along the steep road on the mountain’s east side.

If ever there were a make-work project, this is it.  In the more than eight years I have lived in this area, I never have witnessed any problems caused by the old drainage ditches and there really did not seem to be any problems there caused by cascading storm water.

However, the other project on I-68 on the east side of Big Savage Mountain makes the drainage undertaking look to be fiscally sound.  The interstate highway has a narrow median with a guardrail down the middle.  This past week, drivers going east and west were shuttled into one lane to accommodate workers putting down rolls of new sod in the narrow median strip.  If ever there were a worthless project, this was it – and even my children commented on its uselessness.

If these “stimulus”-funded undertakings are typical of what the Congress directed for states and localities, then the “leaders” of the U.S. government are even more delusional than I had imagined.  Not only are they handing out money in a manner that imperils our future, but they also are demanding that it be spent on phantom things that intelligent people never would need in the first place.

This is not “change we can believe in.”  This is government as usual.

The Stimulus Helped the Economy? Not So Fast!

“The Forest Service has directed that $2.8 million in ‘Wildland Fire Management’ funds, approved under the economic stimulus law, go to groups that will create ‘green jobs’ in the District of Columbia. The projects are intended to restore public parks and watersheds in the city and highlight the value of urban parks, including a park 2 miles north of the White House that once was plagued by crime.” (AP, Thursday)

“Green” jobs aren’t free.

FEE Timely Classic:
“Why Government Can’t Create Jobs” by Mark Ahlseen

“Throughout the summer, the administration had averaged about $4 billion in new spending obligations per week, but went on a two-week $25 billion spree just in time to meet the president’s $225 billion goal for the first 200 days. Spending plummeted to less than $4 billion in the week of Sept. 5 through Sept. 11.” (Washington Times, Monday)

Plummeted to $4 billion? Gives “hair of the dog” new meaning.

FEE Timely Classic:
“A Government Program for All” by Paul Cwik