Saturday, March 21, 2009

What's wrong with this comic?

Click on the graphic to enlarge.

I think the writer probably had "balanced trade" in mind, rather than "a balanced budget." In a closed economy, both imports and exports are zero, so trade is necessarily balanced. But these three guys can certainly set up a government as a institution and then have the government tax, spend, and borrow money (clamshells?) from each of the three citizens. There is no reason the budget needs to be balanced.

On the other hand, without any women on the island, there won't be future generations to inherit the government debt. So there may be little point in running a budget deficit. Maybe what Silver-Lining Phil meant is, " least we have an economy with Ricardian equivalence."