Keynesian Idiocy Again
Aug. 31st, 2005 04:30 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
fishsupremeAnd, as happens during every major disaster, someone in the government is looking on the bright side with Keynes's broken window fallacy:
"Reconstruction is going to add jobs and growth to the economy," Ben Bernanke, chairman of the White House Council of Economic Advisers, told CNBC's "Morning Call." "As long as we find that the energy impact is only temporary and there's not permanent damage to the infrastructure, my guess is that the effects on the overall economy will be fairly modest."
No. Reconstruction after a disaster is not good for the economy. Wars and disasters do not generate jobs or growth. The source of economic prosperity is not busy-work -- it is not the act of working that benefits the economy, nor the acts of buying and selling, nor the flow of money as it changes hands. I get the impression that the Keynesians think that you would benefit the economy by flushing money down the toilet, so long as you used somebody else's toilet.
Wealth and prosperity come from production -- the fact that you have more after you do work than you had before. Reconstruction after a disaster produces almost nothing -- it just gets you back to where you were before. All that work goes into a black hole of economic uselessness, like the money spent on tax preparation (tax accountants produce nothing of value, and money paid to them doesn't even get spent on government programs -- it's just waste.)
What the Keynesians overlook is that all the people and work and effort that go into reconstruction would have gone into something else -- into producing something -- if the disaster had not forced them to spend it on reconstruction.
The wrongness of the broken window fallacy can be illustrated by an intutitively obvious example -- if disasters, wars, etc. are good for the economy, why don't we just have the military blow up a major city each year? Wouldn't that be the ticket to lasting prosperity?
Listening to government economists talk about economics feels like listening to "intelligent design theorists" talking about evolutionary biology. They use the right words, but they don't know what they mean.
"Reconstruction is going to add jobs and growth to the economy," Ben Bernanke, chairman of the White House Council of Economic Advisers, told CNBC's "Morning Call." "As long as we find that the energy impact is only temporary and there's not permanent damage to the infrastructure, my guess is that the effects on the overall economy will be fairly modest."
No. Reconstruction after a disaster is not good for the economy. Wars and disasters do not generate jobs or growth. The source of economic prosperity is not busy-work -- it is not the act of working that benefits the economy, nor the acts of buying and selling, nor the flow of money as it changes hands. I get the impression that the Keynesians think that you would benefit the economy by flushing money down the toilet, so long as you used somebody else's toilet.
Wealth and prosperity come from production -- the fact that you have more after you do work than you had before. Reconstruction after a disaster produces almost nothing -- it just gets you back to where you were before. All that work goes into a black hole of economic uselessness, like the money spent on tax preparation (tax accountants produce nothing of value, and money paid to them doesn't even get spent on government programs -- it's just waste.)
What the Keynesians overlook is that all the people and work and effort that go into reconstruction would have gone into something else -- into producing something -- if the disaster had not forced them to spend it on reconstruction.
The wrongness of the broken window fallacy can be illustrated by an intutitively obvious example -- if disasters, wars, etc. are good for the economy, why don't we just have the military blow up a major city each year? Wouldn't that be the ticket to lasting prosperity?
Listening to government economists talk about economics feels like listening to "intelligent design theorists" talking about evolutionary biology. They use the right words, but they don't know what they mean.
