A:

Fool in the shower is a term that was coined by Milton Freidman, an American Nobel Prize-winning economist, who advocated a marketplace with minimal government intervention. His policy prescriptions maintained that any stimulus to the economy should be done slowly, rather than all at once because it takes time to determine the effects of the changes. For example, a change in the federal funds rate takes about six months to fully integrate into the economy.

He compared the situation to taking a shower. A fool gets into a cold shower before the water has had time to warm up. Rather than waiting for the temperature to adjust, the fool turns the hot water all the way up and eventually scalds himself.

For more on this read, The Whens and Whys of Fed Intervention.

This question was answered by Katie Adams.

RELATED FAQS
  1. What's the difference between a market economy and a command economy?

    Set by supply and demand, a market economy operates through a price system; in a command economy, governments control the ... Read Answer >>
  2. What do Keynes and Freidman have to do with fiscal and monetary policy?

    Find out how John Maynard Keynes and Milton Friedman influenced how modern economists and analysts think about fiscal and ... Read Answer >>
  3. What economic measures can be taken to encourage free enterprise?

    Learn about the types of economic policies that support free market capitalism, as espoused by thinkers in the classical ... Read Answer >>
  4. Do stimulus checks work?

    In theory, stimulus checks are intended to increase the amount of capital in the economy. By giving back tax dollars in the ... Read Answer >>
  5. What does it mean to be "above water"?

    The term "above water" is used to describe any situation in which the ending or current value of a subject is higher than ... Read Answer >>
  6. How can a government balance the stimulating effects of increased spending with the ...

    Read about some of the problems with analyzing the impact of government spending, both in terms of stimulus multipliers and ... Read Answer >>
Related Articles
  1. Economics

    Keynesian Economics

    Learn more about this economic theory that incorporates government intervention in the marketplace.
  2. Economics

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  3. Home & Auto

    New Home Repair Troubleshooting

    Think a new home means no repairs? Think again. Learn about common repair and maintenance items and how to cut your costs.
  4. Personal Finance

    Looking for Cost-Effective Ways to Save Water?

    There are lots of things you can do to save water at home while reducing your ecological footprint at the same time. Here are five simple ways to do it.
  5. Economics

    A Look At Fiscal And Monetary Policy

    There's a debate over which policy is better for the economy. Find out which side of the fence you're on.
  6. Savings

    Teaching Financial Literacy To Kids: What Is Money?

    Teach your kids what money is and how it works, from bartering, to cash and coin to the concept of credit.
  7. Fundamental Analysis

    4 Misconceptions About Free Markets

    These fallacies have hounded free market economists since the days of Adam Smith.
  8. Stock Analysis

    Have Stocks Seen the Bottom Yet?

    The market has been turbulent as of late. But have stocks hit bottom?
  9. Forex Education

    Free Market Maven: Milton Friedman

    As proponent of free market capitalism, this economist changed the way the world's economies operate.
  10. Economics

    Economist Guide: 5 Lessons Milton Friedman Teaches Us

    Find out what can still be learned from the late economist Milton Friedman, a Nobel prize winner and champion of free market economics.
RELATED TERMS
  1. Fool In The Shower

    The notion that changes or policies designed to alter the course ...
  2. Greater Fool Theory

    A theory that states it is possible to make money by buying securities, ...
  3. Fool's Gold

    Also known as iron pyrite, fool's gold is a gold-colored mineral ...
  4. K-Percent Rule

    A theory of macroeconomic money-supply growth first postulated ...
  5. Market Economy

    An economic system in which economic decisions and the pricing ...
  6. Trillion Dollar Coin

    A trillion dollar coin is a theoretical coin that could be legally ...
Hot Definitions
  1. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  2. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  3. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  4. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS ...
Trading Center