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Dr. Richard W. Rahn recently introduced the concept of Flaccid Brains with these comments:

If government spending is growing faster than gross domestic product (GDP), can the resulting deficit problem be solved by:

  • Decreasing the rate of growth of government spending;
  • Increasing tax rates;
  • Decreasing the rate of growth of government spending and increasing tax rates?

If your answered (A), you have a strong brain and can go to the head of the class.

If you answered (B), you have a flaccid brain and will need to repeat the class.

I will get back to the (C) students later.

People with flaccid brains have a hard time understanding the consequences of actions, and they tend to treat variables as constants (e.g., I know how to drive, so I should be able to drive drunk). As we know from both physics and behavioural science, almost every action causes some reaction. Flaccid brains, for various reasons, have a hard time understanding this basic principle of nature. Hence, they rarely do real cost-benefit analyses or think about the long run.

Dr Rahn also feels that politicians are not the only ones to suffer from flaccid brains; often major business leaders suffer from the same ailment.

He would have found many examples both on the political and ‘big business’ side during our recent Federal Elections.

Both politicians and business were eager to raise taxes on some sectors, bringing relief to those who seemingly missed out on such taxes (an example being the unaffordable Maternity Benefits Paid Leave, designed only to be at the expense of larger corporations).

Politicians caving into Union Thugs who insisted that international ships pay protected wage rates to their crew members while travelling in Australian waters.

Such flaccid brain thinking, overlooks the fact that by reducing Australia’s competitive edge (enhanced by choosing the most economic shipping rates), it reduces the demand for our products (simply because inflated wage costs, like taxes, makes Australia less competitive on the international scene).

Business “leaders” and politicians should be seeking to reduce costs and taxes to ensure that our long-term jobs are secure by being internationally competitive.

A strong brain, as contrasted with a flaccid brain, will show, according to Dr. Rahn, that in the long run, this would be a win-win situation for the companies, Australia and the world economy.

What do you think?


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