The Free Market Fairy, Megan McArdle, hard at work on her blog.
Megan McArdle heh-indeeds an Arnold Kling post:
Arnold Kling offers a disturbing fable.
That's all she wrote, so let's look at the fairy tale.
Once upon a time, everyone worked for the MyTeaEst corporation, which produced one million loaves of bread in the year 2000. It paid its workers in bread, and they ate the one million loaves.
And then it went out of business because it didn't make a profit?
MyTeaEst also gave half of its workers a pension plan, promising them one million loaves of bread in 2025. It gave the other workers a 401(K) plan, where the workers deposited bonds issued by MyTeaEst that promised one million loaves of bread in 2025.
That was stupid. No wonder the management can't make a profit; they're idiots. They agree to give people money that the company will never have. Isn't this illegal? Obviously the management has been enchanted by a wicked witch who forces them to make bad management decisions.
Eye of newt, toe of frog,
Make this owner commit fraud!
The year 2025 came. MyTeaEst still produced one million loaves of bread, with a new generation of workers. Those workers expected to be paid, in the aggregate one million loaves of bread. The older generation of workers on the pension plan expected one million loaves. And the older generation of workers with the 401(K) plan expected that their bonds would be repaid.
What do you suppose happened?
A handsome prince came along and kissed the management team with stimulus money so the entire economy wouldn't collapse. The management team retired on the Caribbean Island that they bought with the money, while the workers starved to death.