On why alien invasions can’t fix economies
Back in August of this year, 2008 Nobel laureate and Keynes disciple Paul Krugman (pictured left) made the following statement:
“If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” he said. “And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better–”
“We need Orson Welles, is what you’re saying,” Harvard economist Ken Rogoff interrupted.
“There was a ‘Twilight Zone’ episode like this in which scientists fake an alien threat in order to achieve world peace,” Krugman continued. “Well, this time, we don’t need it, we need it in order to get some fiscal stimulus.”
I mentioned this in the about section of this blog, but the logic is so ridiculous to me that it demands its own article. Yes, I realize he’s saying it tongue-in-cheek. Thats not what makes the statement ridiculous. What makes the statement ridiculous is that he actually thinks that redirecting the productive capacity of this nation towards fighting off any enemy would benefit society. Keynesians love using examples like this to justify government spending on war. After all, World War II was the sole reason we escaped the Great Depression, right? (Well, empirically, no)
Krugman’s alien invasion scenario is a metaphor for a World War III. Using common sense and a little bit of historical knowledge, its easy to see why a third World War would be a bad thing for the economy (and humans in general). Sure, we’d probably have a drastic reduction in unemployment. We’d probably have a shortage of labor even, requiring production in other areas to be interrupted andredirected to helping the war effort. Thats exactly what happened in the 1940s.
Full employment is a nice metric, but an economy isn’t necessarily healthy if it has full employment. An economy is healthy if the needs and wants of its people are met and even exceeded (prior to this year, I had no idea what an iPad could do for me). Life during wartime is a life of austerity (it ain’t no party…it ain’t no disco). I was watching a documentary on H.J. Heinz the other day and during WWII, the government had Heinz convert his main factory to build war planes instead of ketchup (talk about a 180). The picture to the right is the ad that Heinz ran after the war when they converted their factory back (check out the bottom line: “- with all the zest of it’s PRE-WAR FLAVOUR!”). But in Krugman’s war economy, “frivolous” things like iPads and ketchup don’t get produced. To quote a rapping Hayek, “If all the workers were employed in the army and fleet, we’d have full employment, and nothing to eat.” Or, to quote David Byrne in his classic song ‘Life During Wartime’:
I got some groceries, some Peanut Butter
To last a couple of days.But I ain’t got no speakers, Ain’t got no headphones
Ain’t got no records to play.
Bottom line is we do not better society by spending our scarce resources (time and money) on wasteful endeavors. The opportunity costs are tremendous because at the end of Krugman’s 18 month farce, instead of an economy with better technology, farming practices and manufacturing processes, we have anti-space ship weapons. What the hell are we going to do with those? But to a Keynesian, a spoon is a shovel is a backhoe. Tell that to the construction worker looking a dig out a foundation, or the mother looking to feed a baby. What we spend our time and resources on matters.
Hey mate! I really like what you’re providing here. Keep going that way.