Monday, December 22, 2008

What Exactly Is "Priming the Pump"?

I have always had a rough idea of what the Keynesian use of the metaphor for economic stimulus, "priming the pump", was about, but never exactly, until now.

In a column for, Timothy Carney, figures it all out and shares his discovery with the world:

While it has a bias towards spending, Keynesian thought professes that deficits per se — even if brought about by tax cuts — are good because getting money into the hands of consumers “primes the pump” of the economy.

What the heck is “priming the pump”?

Until this week, every time I heard someone talk about government spending priming the pump,” I envisioned the primer button on my parents’ lawnmower, which I pumped a couple of times to get gasoline into the engine. But that’s “pumping the primer” or “priming the engine,” not “priming the pump.”

“Priming the pump” has to do with pumps — like water pumps. The metaphor is pretty opaque to the modern eye, once you start thinking about it. How does one prime a pump, and why?

I’ve never done it, and neither has my dad, who may be the oldest guy on the planet. I poked around a bit, and came up with this explanation for “priming the pump”:

Think of a pump coming up out of a well. It works by suction. If air gets in the pipe, then it may be nearly impossible to get water out of it.“Priming the pump” appears to be pouring water down the pipe to flush out the air. This makes the pump actually work.

So, returning to the analogy: maybe the economy is weak, and so people’s labors (pumping the handle) aren’t generating wealth (water). Only by taking some wealth (water) that’s sitting around, and injecting it back into the economy (pouring it down the pipes) in the form of government spending, can you make labor (pumping) productive.
Unfortunately for Keynes, the economy is not like a pump.There is no air and no pipe. What is going on is a readjustment period. It is more like water seeking its own level after the government takes its bloated body out of a bathtub, because if it doesn't take its body out and continues to inflate itself, the water is going to flow over the side, causing a loss of water (wealth.)

So we shouldn't be "priming the pump", but, rather, "getting the bloated beast out of the water."

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