Here is a howler from Paul Krugman:
The fact is that war is, in general, expansionary for the economy, at least in the short run. World War II, remember, ended the Great Depression. The $10 billion or so we’re spending each month in Iraq mainly goes to US-produced goods and services, which means that the war is actually supporting demand. Yes, there would be infinitely better ways to spend the money. But at a time when a shortfall of demand is the problem, the Iraq war nonetheless acts as a sort of WPA, supporting employment directly and indirectly.
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I think that what Mr. Krugman is trying to get across here is that he has some windows in need of breaking.
Keep it up, Krugman. When you get the easy stuff dead wrong, it makes it easier to reject your more convoluted arguments.
Would we really expect much different from Paul Krugman, an ardent disciple of Keynes, who stated in the General Theory that paying workers to dig holes one day and fill them in the next day is enlightened government policy during an economic downturn since it stimulates aggregate demand.
Another sad commentary on the general state of economics.
However, I might add that at least the digging/filling holes scenario does not involve the destruction and, more importantly, death that war does.
Coincidentally, I’ve just been rooting through US macro data looking at investment spending.
The upshot is that, on average over the past 50 years, private businesses have annually spent a net sum (after estimated depreciation) equivalent to around 4.5% of the existing total of their aggregate equipment and software assets to upgrade them but that the sums squandered on Defense (i.e. Attack) amounted to nearly 19% of that same stock!
Taken at face value, this implies that every five years, America could have entirely replaced its productive machinery with the latest and the best, raising living standards and creating well-paid jobs, were it not for the Costs of Empire.
In truth, matters were probably worse than this suggests since (a) as Bob Higgs has often pointed out, the official defense line item is far below actual expenditures undertaken; (b) much of that ‘private’ spending and stock resides with the MI Complex crew, not with genuine producers of peaceful goods; and (c) the amount and the quality of equipment each civilian manufacturer can buy with each dollar he does spend is presumably reduced by the voracious competition from the cost-plus mob.
Go not abroad, in search of monsters to destroy, indeed!
This reminds me of a comedy bit I was trying out about how the Holocaust was good for the German economy because it created jobs for security guards, barbed-wire manufacturers, and oven cleaners, but unfortunately on the whole it led to the wholescale slaughter of many potential doctors, innovators, entertainers, etc. It’s funny also that Krugman claims to be a huge enemy of the Bush administration but then pulls out this canard. Someone at the Mises Institute needs to write a book exposing and correctiny many of Krugman’s fallacies over the years. I suggest Robert Higgs.
I suggest that we start periodically choosing random US cities to bomb, as the reconstruction of those cities will naturally increase aggregate demand.
Why is this man taken seriously?
Ron,
We’ve already started. Haven’t you heard the wonderful news from New Orleans lately?
~Jaq
There is a bit of a beginning of an explanation on the phenonmenon that is Krugman in Krugman’s book on international trade, which I don’t have at home so I’ll paraphrase; “journalism is a very bad medium to explain economics, and journalists who would try and comment or explain economics to the mass would only fail miserably, and this is why journalism should never even try to do sound economics.”
And, please believe me, this is an only very slightly biased paraphrasing of the original quote. Go check it yourself.
In the beginning, there were a lot of people who were ambivalent about the war in Iraq. On the one hand, they’d say that Iraq wasn’t responsible for 9-11, but on the other hand, they’d say that people like Saddam Hussein shouldn’t be running a country. I think that many of them were relieved when the government provided them with evidence that supported the decision to go to war.
The only problem is that once the evidence was proven faulty, that ambivalence came back to bite people like Krugman in the ***, because their lack of personal conviction resulted in a broken economy and broken lives…and lots of broken windows. Now they look for ways to rationalize what’s happened. One way is to say that it’s helping the economy, when in reality, they are simply breaking more windows…
Krugman is taken seriously because of where he works. He works there because he promotes spending and debt. People who promote spending and debt are hired because the people who own the media want people in debt.
There’s no mystery here. It’s not ideological or mass stupidity. Krugman is the useful idiot who frames the national discourse.
please, more on the role of ‘useful idiots’, like Krugman, used to (mis-)shape popular sentiments..
He works there because he promotes spending and debt. People who promote spending and debt are hired because the people who own the media want people in debt.
Conspiracy theory much?
EVERYONE needs to read Murray’s excellent “Wall Street, Banks and American Foreign Policy”.
It simply was my life’s widest awakening.
It IS the “big picture” as they say.
One 40 page essay every single American should read at least once – along with the Declaration of Independence (which I now view as the bait Hamilton used for his switch).
“World War II, remember, ended the Great Depression.”
<<<<
World War II, remember, ended the Great Depression
Well, at least he admits, however backhandedly, that FDR’s New Deal was a failure.
Krugmen is right, but he doesn’t go far enough. It’s not enough to simply start wars, the best way to make everyone prosperous is to kill every man, woman, child, and puppy. You see, all this murder is going to take people to commit the murders, thus unemployment will drop. Not only that, but this is going to take quite a many bullet, gun, ax, flame-thrower, and whatever other tools one may wish to use. So of course, this will increase aggregate demand for these goods. Thanks to this solution, everyone will be prosperous and happy…and dead. (Hey, I guess Keynes was right about the long-run after all!)
and liberals like this guy?
Just remember, the best you can hope for your nation’s military budget is…nothing. No death, no destruction, just a bunch of equipment and men that aren’t being used for killing people and blowing up stuff. I’m beginning to think that 99.9% of the US military budget is simply a broken window.
Krugman may claim to be an economist in that he holds a Ph.D. in economics and has some other credentials. But he doesn’t understand economics the way that Mises, Rothbard, Hayek and others understand economics. Furthermore, he has an agenda. Modern liberals like Krugman see no problem with the government stealing from some people via taxes to give to others. Regardless of how that which is stolen is used, the fact that government steals from some to give to others is immoral.
Call him an economist. However, there might be difference between calling a person an economist and saying that a person understands economics
“he holds a Ph.D. in economics”
So did Keynes. That’s why the credential means precisely squat, as far as I’m concerned.
-jcr
Oops, I was mistaken about Keynes’ academic credentials. He never earned any degree in economics.
-jcr
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