War is good for the economy?
12-07-2010
, 07:30 PM
Claim:
“War is good for the economy because it provides jobs and it generates technology.”
Analysis:
§ Jobs
The purpose of an economy is providing for the satisfaction of consumers.
This means a job is only valuable insofar it improves on the value of resources, as judged by consumers.
Given that the jobs created do not produce consumer goods, or producer goods that are used for consumer goods, those jobs do not benefit the economy. In order to provide the jobs involved in a war-effort, resources and man-power are taken away from the economy; making the economy worse off with less goods to offer and higher prices.
The people who lose their life in a war are not just temporarily but permanently taken away from the economy.
The resources that are lost in a war are not just those taken away to engage in a war-effort, but also resources are destroyed in the conflict itself; not just the tools produced for the war-effort and the people who are hurt or killed, but also property of people not involved in the war-effort and the health and lives of people who are not mobilized.
Under a situation of total war where all people are mobilized there would be no private sector, and all things consumed to live would be those things created under the command structure. People would almost all eat the same things and have the same low standards of living. This 'economy' would pale compared to what it was beforehand.
Even though war cannot improve the economy as a whole, it can improve the wealth of some at the expense of others. If you produce tools for war then you could stand to gain from the resources that are channeled from other parts of the economy to your venture.
§ Technology
Even though technology can be generated in a war-effort, technology is also generated in a consumer-oriented economy. In order to make a profit and sustain their operations, producers develop goods and services that others wish to trade for. The challenge is to improve on resources in such a way that consumers are willing to give up more money than was incurred in costs. In order to do this, producers develop technological skills and knowledge. At the same time profit-areas attract competitors who try to do the same thing but better.
And then there is the general competition where all consumer goods compete with all other consumer goods for buyers, which forces everyone to stay on top of their game.
What producers do in order to secure profits in the future is commit resources to short-term and long-term investments; depending on the amount of profit and risk they perceive from them.
Sometimes they commit resources in cooperation with other producers for a shared gain.
If producers make bad estimations and don't invest and produce efficiently and intelligently, they stand to lose all their profits and their capital.
In order to understand the true effect that resources and man-power involved in a war-effort constitutes, we must consider what those things could have generated were they not shifted away. In a peaceful economy, research and development is carefully aligned with current and future consumer desires, and the capital is distributed according to those who use it the smartest and most responsibly. We must expect a better economic result from that situation.
§ Finally
The prior mentioned effects occur at both sides of a battle. What then also must be considered is the lost positive effect that trading under the division of labor between the groups could have had on choices, prices and technology in their economies.
“War is good for the economy because it provides jobs and it generates technology.”
Analysis:
§ Jobs
The purpose of an economy is providing for the satisfaction of consumers.
This means a job is only valuable insofar it improves on the value of resources, as judged by consumers.
Given that the jobs created do not produce consumer goods, or producer goods that are used for consumer goods, those jobs do not benefit the economy. In order to provide the jobs involved in a war-effort, resources and man-power are taken away from the economy; making the economy worse off with less goods to offer and higher prices.
The people who lose their life in a war are not just temporarily but permanently taken away from the economy.
The resources that are lost in a war are not just those taken away to engage in a war-effort, but also resources are destroyed in the conflict itself; not just the tools produced for the war-effort and the people who are hurt or killed, but also property of people not involved in the war-effort and the health and lives of people who are not mobilized.
Under a situation of total war where all people are mobilized there would be no private sector, and all things consumed to live would be those things created under the command structure. People would almost all eat the same things and have the same low standards of living. This 'economy' would pale compared to what it was beforehand.
Even though war cannot improve the economy as a whole, it can improve the wealth of some at the expense of others. If you produce tools for war then you could stand to gain from the resources that are channeled from other parts of the economy to your venture.
§ Technology
Even though technology can be generated in a war-effort, technology is also generated in a consumer-oriented economy. In order to make a profit and sustain their operations, producers develop goods and services that others wish to trade for. The challenge is to improve on resources in such a way that consumers are willing to give up more money than was incurred in costs. In order to do this, producers develop technological skills and knowledge. At the same time profit-areas attract competitors who try to do the same thing but better.
And then there is the general competition where all consumer goods compete with all other consumer goods for buyers, which forces everyone to stay on top of their game.
What producers do in order to secure profits in the future is commit resources to short-term and long-term investments; depending on the amount of profit and risk they perceive from them.
Sometimes they commit resources in cooperation with other producers for a shared gain.
If producers make bad estimations and don't invest and produce efficiently and intelligently, they stand to lose all their profits and their capital.
In order to understand the true effect that resources and man-power involved in a war-effort constitutes, we must consider what those things could have generated were they not shifted away. In a peaceful economy, research and development is carefully aligned with current and future consumer desires, and the capital is distributed according to those who use it the smartest and most responsibly. We must expect a better economic result from that situation.
§ Finally
The prior mentioned effects occur at both sides of a battle. What then also must be considered is the lost positive effect that trading under the division of labor between the groups could have had on choices, prices and technology in their economies.
12-09-2010
, 03:29 PM
12-09-2010
, 05:14 PM
12-09-2010
, 05:15 PM
12-12-2010
, 08:19 PM
12-12-2010
, 08:22 PM
12-16-2010
, 12:56 AM
12-16-2010
, 01:05 AM
12-16-2010
, 10:26 AM
12-16-2010
, 02:26 PM
Clearly we can all agree that the result of such a reluctance of investors to make capital availabile to entrepreneurs, higher interest rates, is anathema to economic health. [/snark off]
============
FallsviewPokerPro, I know you are trying to explain his point, not yours.
12-16-2010
, 03:03 PM
12-28-2010
, 07:53 PM
A thought provoking and perhaps controversial take:
Has American Military Spending Really Been a Form of Keynesian Stimulus?
big idea:
Has American Military Spending Really Been a Form of Keynesian Stimulus?
Quote:
The United States spends over 6% of its GDP on the military—more, if you add the money spent on wars in Afghanistan and Iraq. (And by the way: The self-delusion that keeps those two wars “off the books”? Astonishing—but that’s for another time.)
Since the U.S. is the largest economy in the world, that +6% means that America spends more on the military than the rest of the world combined—with room to spare.
Since the U.S. is the largest economy in the world, that +6% means that America spends more on the military than the rest of the world combined—with room to spare.
Quote:
Military spending as a form of Keynesian stimulus is not an original argument—in fact, it’s been advocated, even by a few non-Keynesians:
A couple of years ago, Martin Feldstein wrote a piece in the Wall Street Journal called “Defense Spending Would Be Great Stimulus”—the title pretty much says it all.
For his part, Paul Krugman wrote a piece back in September called “1938 in 2010”, where he basically argued that World War II deficit spending got the United States out of the Great Depression, and created the conditions for the Post-War Boom—so wouldn’t it be wonderful if something similar happened today (i.e., like a war). Krugman’s argument was not merely flawed—and not merely immoral—but in fact Krugman’s argument depended on fudged data, as I demonstrated here.
David Broder also got on the war-is-good-for-the-economy bandwagon: He wrote a Washington Post editorial for Halloween called “The War Recovery?”, essentially spelling out what Krugman was too slippery and *********** to say out loud except through mealy-mouthed, throwing-a-rock-and-hiding-your-hand inference: Wouldn’t a war be great to stimulate the U.S. economy into growing again?
These three writers are all saying the same thing: American military spending would be a great way to get the U.S. economy back on track.
A couple of years ago, Martin Feldstein wrote a piece in the Wall Street Journal called “Defense Spending Would Be Great Stimulus”—the title pretty much says it all.
For his part, Paul Krugman wrote a piece back in September called “1938 in 2010”, where he basically argued that World War II deficit spending got the United States out of the Great Depression, and created the conditions for the Post-War Boom—so wouldn’t it be wonderful if something similar happened today (i.e., like a war). Krugman’s argument was not merely flawed—and not merely immoral—but in fact Krugman’s argument depended on fudged data, as I demonstrated here.
David Broder also got on the war-is-good-for-the-economy bandwagon: He wrote a Washington Post editorial for Halloween called “The War Recovery?”, essentially spelling out what Krugman was too slippery and *********** to say out loud except through mealy-mouthed, throwing-a-rock-and-hiding-your-hand inference: Wouldn’t a war be great to stimulate the U.S. economy into growing again?
These three writers are all saying the same thing: American military spending would be a great way to get the U.S. economy back on track.
Quote:
As you can see, the Hoover administration cut military spending with the advent of the Great Depression—but the Roosevelt administration increased it dramatically, even though there was no imminent threat of war.
Military expenditures for 1935—the first big bump up—were decided in 1933–‘34: No one would argue in 1934 that world war was even remotely a possibility—especially considering the United States’ isolationist stance following the First World War. No one even in 1939 would have argued that a war involving the U.S. was imminent. After September of ‘39, maybe one could argue that there might be a European war—though the Phoney War/Sitzkrieg of ‘39–‘40 would have severely undercut the argument for an imminent European war. That the United States would be dragged into a possible European war? No way, especially considering the prevalent notion (in 1939) that France was more than a match for Germany.
So the only way to interpret the rise in American military expenditure between ‘34 and ‘40 was as part of the New Deal spending to stimulate the economy: In other words, it was Roosevelt who invented the notion of military spending as a way to prop up the economy—Keynesian militarism.
Military expenditures for 1935—the first big bump up—were decided in 1933–‘34: No one would argue in 1934 that world war was even remotely a possibility—especially considering the United States’ isolationist stance following the First World War. No one even in 1939 would have argued that a war involving the U.S. was imminent. After September of ‘39, maybe one could argue that there might be a European war—though the Phoney War/Sitzkrieg of ‘39–‘40 would have severely undercut the argument for an imminent European war. That the United States would be dragged into a possible European war? No way, especially considering the prevalent notion (in 1939) that France was more than a match for Germany.
So the only way to interpret the rise in American military expenditure between ‘34 and ‘40 was as part of the New Deal spending to stimulate the economy: In other words, it was Roosevelt who invented the notion of military spending as a way to prop up the economy—Keynesian militarism.
Quote:
From a Keynesian perspective, however, a growing military is an ideal way to stimulate the economy: By definition, all military spending is consumption, not investment. Military equipment will either be destroyed in war, or discarded for the sake of newer equipment. Therefore, government spending on the military is a sure-fire way to pump demand into the economy—Keynesians’ idée fixe. (Using the French is so much better than using a good ol’ American word like hobbyhorse, or maybe fixation, or maybe even mania.)
Quote:
To briefly defend this key assumption: No potential military adversary of the United States has had any military or territorial designs on either American soil, American allies, or American interests since 1991. This includes all of the top ten largest militaries in the world, including the European Union member states, China, post-Soviet Russia, India, or any other nation with a credible military power, including Iraq under Saddam Hussein.
Therefore, if we consider that historically, the U.S. has only needed to spend on average about 1.5% of its GDP in order to defend itself, we can think of the difference as the amount of stimulus the Federal government injected into the U.S. economy.
Therefore, if we consider that historically, the U.S. has only needed to spend on average about 1.5% of its GDP in order to defend itself, we can think of the difference as the amount of stimulus the Federal government injected into the U.S. economy.
Quote:
Using the data I sourced above: Subtracting 2% of GDP from the actual figures for the years 1994 to 2010—not including what has been spent on the wars in Afghanistan and Iraq, which are kept off-book—I get a total savings of $4.7 trillion.
$4.7 trillion—that’s the amount of Keynesian stimulus the excessive military spending wrought on the American economy between 1994 and 2010.
Or think of it another way: If we include the interest on Treasury debt added roughly 20% to the tab, then more than 40% of the total U.S. Federal government debt—$5.6 trillion—is due to the excessive military stimulus spending.
Military spending is non-productive consumption—it is waste. So that’s how much the United States has wasted on needless military Keynesian stimulus spending:
$4.7 trillion. Plus interest.
The next time some Keynesian Klown tells you that what the U.S. economy really needs is for the Federal government to “get serious and put more stimulus into the economy—the last stimulus package just wasn’t enough”—go ahead and mention the $4.7 trillion of military stimulus, and $5.6 trillion of debt.
$4.7 trillion—that’s the amount of Keynesian stimulus the excessive military spending wrought on the American economy between 1994 and 2010.
Or think of it another way: If we include the interest on Treasury debt added roughly 20% to the tab, then more than 40% of the total U.S. Federal government debt—$5.6 trillion—is due to the excessive military stimulus spending.
Military spending is non-productive consumption—it is waste. So that’s how much the United States has wasted on needless military Keynesian stimulus spending:
$4.7 trillion. Plus interest.
The next time some Keynesian Klown tells you that what the U.S. economy really needs is for the Federal government to “get serious and put more stimulus into the economy—the last stimulus package just wasn’t enough”—go ahead and mention the $4.7 trillion of military stimulus, and $5.6 trillion of debt.
12-28-2010
, 08:14 PM
12-28-2010
, 09:23 PM
12-28-2010
, 09:27 PM
01-07-2011
, 12:44 PM
01-07-2011
, 12:48 PM
01-07-2011
, 07:11 PM
01-07-2011
, 07:47 PM
01-12-2011
, 10:24 PM
01-15-2011
, 12:22 AM