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. 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 >>
  5. 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 >>
  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. Managing Wealth

    Best Airline for First Class: Emirates vs. Etihad vs. Qatar

    These airlines are known for their luxurious first-class offerings. Here are the luscious details.
  2. Markets

    Keynesian Economics

    Learn more about this economic theory that incorporates government intervention in the marketplace.
  3. Markets

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  4. Markets

    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. Personal Finance

    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.
  6. Markets

    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.
  7. Managing Wealth

    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.
  8. Markets

    4 Misconceptions About Free Markets

    These fallacies have hounded free market economists since the days of Adam Smith.
  9. Markets

    Have Stocks Seen the Bottom Yet?

    The market has been turbulent as of late. But have stocks hit bottom?
  10. Managing Wealth

    United's New Polaris Business Class: Worth it?

    United's new Polaris Business Class uniquely focuses on sleep. Here's how it compares to the competition.
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. Alfred Nobel

    The man after whom the Nobel Prize is named. Nobel, born in 1833 ...
  6. Market Economy

    An economic system in which economic decisions and the pricing ...
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center