You are making erroneous conclusions because you do not think through the economic impact that follows, when low-end salaries are enhanced. And which is not at all the same consequence when high-end salaries are increased - whereupon people simply bank their additional salaries (or speculate with the money), which does nothing intrinsically to enhance the economy. - Lafayette
Let's say that I'm hungry. I go to the farmer's market where I find Frank the farmer selling artichokes. Which is great because I really love artichokes! What do you think happens next? Do you think I simply hand Frank my money in exchange for his artichokes? Of course not. First I look at the prices... and if the prices seem reasonable... then I carefully inspect the artichokes. If I'm happy with the quality of the artichokes... I pick out the best ones and put my money into Frank's hand.
This is where you, the well-intentioned liberal economist, step in. Before Frank can put the $3 dollars that I gave him into his pocket... you take $1 dollar out of Frank's hand. Except, since I'm the one who just gave him that money... you essentially took the money out of my hand. What do you do with the $1 dollar that you took out of my hand? You put it in the hands of Frank's employees.
The thing is... the money that I gave Frank was my valuation of his productivity. But, evidently, you're certain that I overvalued Frank's productivity. Not only are you certain that I overvalued Frank's productivity... but you're also certain that I undervalued his employees' productivity.
I overvalued Frank's productivity? I undervalued his employees' productivity?
First... who in the world are you to say that I've overvalued Frank's productivity? Are you my son? Are you my father? Are you my brother? Are you my best friend? Are you my lover? Are you the customer waiting behind me? Of course not! You're some random economist who doesn't even know me or Frank. Yet, despite the fact that you don't know me or Frank... you're stupidly certain that I overvalued his productivity.
Second... I didn't even valuate the productivity of Frank's employees. Why in the world would I valuate their productivity? I'm not their boss... Frank is! He's the one who employs them. I don't employ them. I don't even know them. I have absolutely no idea whether they are the most productive workers in the world or the least productive workers in the world. Given that I'm entirely clueless about the productivity of Frank's employees... it would be utterly nonsensical and completely detrimental for me to even try and valuate their productivity. Yet... you're stupidly certain that I undervalued Frank's employees.
This isn't what you're telling me of course. What you're telling me is that I'm not thinking things through. From your perspective... the money that you took from my hands and put into the hands of Frank's employees will be quickly spent. How will it be spent? It doesn't matter. It doesn't matter if the money isn't spent on producing a greater abundance of artichokes... what matters is that the money will be spent on something. Which is a good thing because any and all spending will "enhance" the economy. As if the reason that the sluggish economy needs stimulation has absolutely nothing to do with your mindless meddling and everything to do with inadequate demand.
When you read the Bible story about the prodigal son... does it make you happy or sad when he quickly squanders his inheritance?
Does it make you happy or sad that Esau sold his inheritance to Jacob for a bowl of soup?
Does it make you happy or sad when lottery winners quickly squander their new found wealth?
Does it make you happy or sad when natural disasters force people to spend their savings in order to rebuild their lives?
Does it make you happy or sad when you forget to back-up your work and a disaster forces you to start all over again?
Does Adam Smith make you happy or sad?
Capitals are increased by parsimony, and diminished by prodigality and misconduct. - Adam Smith, Wealth of Nations
Does Ludwig von Mises make you happy or sad?
Now one of the main functions of profits is to shift the control of capital to those who know how to employ it in the best possible way for the satisfaction of the public. The more profits a man earns, the greater his wealth consequently becomes, the more influential does he become in the conduct of business affairs. Profit and loss are the instruments by means of which the consumers pass the direction of production activities into the hands of those who are best fit to serve them. Whatever is undertaken to curtail or to confiscate profits impairs this function. The result of such measures is to loosen the grip the consumers hold over the course of production. The economic machine becomes, from the point of view of the people, less efficient and less responsive. - Ludwig von Mises, Planning for Freedom
Does Ludwig Lachmann make you happy or sad?
Moreover, what is a resource today may cease to be one tomorrow, while what is a valueless object today may become valuable tomorrow. The resource status of material objects is therefore always problematical and depends to some extent on foresight. An object constitutes wealth only if it is a source of an income stream. The value of the object to the owner, actual or potential, reflects at any moment its expected income-yielding capacity. This, in its turn, will depend on the uses to which the object can be turned. The mere ownership of objects, therefore, does not necessarily confer wealth; it is their successful use which confers it. Not ownership but use of resources is the source of income and wealth. — Ludwig Lachmann, The Market Economy and the Distribution of Wealth
Does J.B. Say make you happy or sad?
Taxes upon transfer, besides the mischief of pressing upon capital, are a clog to the circulation of property. But, has the public any interest in its free circulation? So long as the object is in existence, is it not as well placed in one hand as in another? Certainly not. The public has a perpetual interest in the utmost possible freedom of its circulation; because by that means it is most likely to get into the hands of those, that can make the most of it. Why does one man sell his land? But because he thinks he can lay out the value to more advantage in some channel of productive industry. And why does another buy it? But because he wishes to invest a capital, that is lying idle, or less productively vested; or because he thinks it capable of improvement. The transfer tends to augment the national income, because it tends to augment the income of the two contracting parties. If they be deterred by the expenses of the transfer, those expenses will have prevented this probable increase of the national income. — J.B. Say, A Treatise on Political Economy