Wednesday, July 20, 2011

Breaking Stuff

Back in the day, when FLG lived in a dorm, there was a Marine who lived down the hall and was fond of saying that his job was to kill people and break stuff.

Greg Mankiw posts this quote from Larry Summers:
Never forget, never forget, and I think it’s very important for Democrats especially to remember this, that if Hitler had not come along, Franklin Roosevelt would have left office in 1941 with an unemployment rate in excess of 15 percent and an economic recovery strategy that had basically failed.

FLG has mentioned this before, but when confronted with an economic policy he dislikes he begins by asking himself two questions. The second question is whether the policy places more emphasis on the short run than the long run, but the first question is whether the proposed policy is akin to the parable of the broken window, which is to say, does this policy destroy wealth to stimulate the economy?

Look, the American economy is a complicated thing. The global economy is even more complicated. But whenever FLG hears somebody point towards WWII and then the post-War boom of the 1950s as vindication of government stimulus on a grand scale, he cannot help but think, uh, yeah, but too bad there was that whole death and destruction thing.

Think of it this way. If we burned down a third of the houses and apartment buildings in this country, then we'd stimulate the heck out of the economy, but we clearly wouldn't be better off as a nation.

1 comment:

The Ancient said...

Some significant portion of those mothballed housing projects in the southwest are apt to be bull-dozed. (Even here in DC, there are what look like unfinished Section 8 projects in Anacostia that are on the verge of falling down. I find this vaguely astonishing.)

But my bigger point: I took the Acela up to Manhattan last month and I was amazed at the number of warehouse and factory buildings that are abandoned in sight of the tracks. Most look to be pre-WW1, and their design, condition and location mean they're not ever going to be rehabbed. Meanwhile, they're dangerous, and a deterrent to development just where local officials would most like to see it occur. Why aren't we hiring tens of thousands of underemployed young men to tear these things down?

Demolition is always a shovel-ready project.

P.S. "If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing." Book 3, Chapter 10, Section 6, pg.129, "The General Theory."

 
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