[tylerdurden]

[ QUOTE ]
pvn, would you agree that paying people to dig ditches, and then fill them improves GDP?

I'm not asking if it makes sense or is +EV. I'm sure you see the difference.

[/ QUOTE ]

I want to go back to this point.

Yes, paying someone $100 to dig a ditch and fill it back up increases GDP. Just giving someone the $100 for no work would not increase GDP. In this comparison, if you think that paying the guy is better for the economy than giving the money away, you're actually subscribing to the labor theory of value.

Wait, did I just say that giving the $100 away would be better for the economy? Yes. In that case, the laborer has the $100, plus he's still available to do someting actually useful.

Now, let's ignore that minor distinction. The more interesting question is whether paying someone $100 to dig a ditch and fill it in is better than not. Clearly, when your $100 has alternative uses, it's better to save the $100 and spend it on something of value. This is worse for the ditch digger, but better for me and for whoever actually provides useful services.

Well then, what if the $100 comes out of a magical barrel of money that never runs out? If you don't understand inflation, then we probably need to start a whole new thread. Even if we had a magical barrel of money that never runs out AND doesn't cause inflation, it STILL would be a bad idea to pay for ditch digging and filling, since we could in that case just give the money away.

Note that *all* of this changes if someone places a pipe or a cable in the ditch before the guy fills it back in. In that case, the sponsor may be able to generate more than $100 by transporting gas or water or data through the conduit in the ditch.

Now, maybe I have some weird psychological thing and I just enjoy watching people work. It's an entertainment expense, perhaps. In this case, however, I would either hire people to build useful things (such as ditches for pipes), so that I could recoup my expense, or I would simply go to constuction sites and watch people work for free.