Friday, June 13, 2014

OMG Koch Funded Economist: The Lack of Major Wars May Be Hurting Economic Growth

Tyler Cowen, who teaches at Koch-funded George Mason University and is general director of the Koch-funded Mercatus Center, has launched the broken window fallacy and put it on steroids. Cowen  writes today in the NYT:
An additional explanation of slow growth is now receiving attention, however. It is the persistence and expectation of peace. 
The world just hasn’t had that much warfare lately, at least not by historical standards...
It may seem repugnant to find a positive side to war in this regard, but a look at American history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military contracting, not today’s entrepreneurial social media start-ups. The Soviet launch of the Sputnik satellite spurred American interest in science and technology, to the benefit of later economic growth. 
War brings an urgency that governments otherwise fail to summon. For instance, the Manhattan Project took six years to produce a working atomic bomb, starting from virtually nothing, and at its peak consumed 0.4 percent of American economic output. It is hard to imagine a comparably speedy and decisive achievement these days.
For the record Cowen has, alternatively, within months, written a book arguing that the economy is stagnant, (See: The Great Stagnation) followed by a book that argues that "average is over,"(SEE: Average Is Over: Powering America Beyond the Age of the Great Stagnation. Now, apparently, he must believe the stagnation is back and that killing people is the only way to get the economy going once again.

This is the most incredible window fallacy distorted thinking I have seen in NYT, ever. Even Paul Krugman doesn't go this far, Krugman stops at calling for fighting against imaginary martians. Cowen apparently thinks the US would benefit from a major war and he seems to believe that if such a war were to be launched and caused  the development of new weapons of mass destruction, this would be all the better for the economy.

Of course, the window fallacy comes into play here, because money not spent killing people in a "war for economic growth" doesn't disappear, it is simply directed to non-violent production. such as curved televisions, cell phone watches, smart phones, Uber, etc. And innovations take place that way.

For Henry Hazlitt's demolishing of the broken window theory, see his great book, Economics In One Lesson.

-RW

13 comments:

  1. I realize that anything the Kochs touch automatically gets cooties, but you did not reference anything in another paragraph of Mr. Cowen's in that same article:

    Counterintuitive though it may sound, the greater peacefulness of the world may make the attainment of higher rates of economic growth less urgent and thus less likely. This view does not claim that fighting wars improves economies, as of course the actual conflict brings death and destruction. The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work. Rather, the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation’s longer-run prospects.

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    1. It is your quote that takes Cowen's analysis out of context. The NYT headline writer seems to agree with Wenzel's take on the theme of Cowen's article: "The Lack of Major Wars May Be Hurting Economic Growth"

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    2. Nice try but "investing in science or simply liberalizing the economy..." is not what happens during war. Government simply spends more on war technology and its application in peace is generally a waste of time (as in the space program). The economy itself becomes far less liberal as the government bureaucrats control everything. A better argument in favor of war would be for all the sociopaths and psychopaths who run the various governments in the world be placed on the front line and as soon as they were all dead, peace would break out!

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  2. Good grief, the absolute garbage that emanates from these so-called economists is amazing.

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  3. Cowen is an open-borders freak anyway.

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  4. Soooo he would think that building a ton of expensive aircraft carriers loaded with the most expensive airplanes on earth and sinking the ships in the middle of the ocean would be an economic boom.


    How stupid do you have to be to believe that?

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    1. Did you not read the quote by Cowen above?

      "The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work."

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  5. Let's launch a war on monetarists of all stripes. After victory the clarity of hindsight will reveal what had been killing economic growth for the masses.

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  6. Perhaps nothing more than a parochial interest for Mr. Cowen, in that George Mason U. is based in Fairfax County, part of the heart of the DC region that has become a Gilded Age (high price, boom city) built much on Military, homeland Security ramp-up post 911. The number of companies and individuals in said region that make a living (a good one at that) off this stuff is immense. Wants to keep those paying students at GMU, and perhaps consulting contracts he receives from the Mil-HS complex.

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    1. And yeah, this. It's easy to understand how anyone living near DC can come to the conclusion that all economic activity would come to a grinding halt without the military industrial complex.

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  7. Reading the whole thing gave me a headache. How can such twisted logic get imbedded in his brain?

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  8. I posted the following: Cowen has jumped the shark with this asinine excuse for logic. Go back and read your Bastiat - "seen vs. unseen" - http://www.econlib.org/library/Bastiat/basEss1.html . Governments invest to satisfy political interests - not to generate a profit. Any diversion of resources away from innovators to the pet interests of politicians and bureaucrats will diminish our economic growth and overall standard of living. I expect better from Cowen. Pathetic.

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  9. Speaking of suction cups on the Kochtopus, lest we not forget Steve "Forever Butthurt" Horwitz's admission that he thanks the Kochs for making him the "libertarian" or "person" or "economist" or some other self-descriptor he is today.

    If you know his work, this is all the indictment of Charles and David you need.

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