Wednesday, June 18, 2014

Professor Tyler Cowen Wants the Pentagon to Break a Few Windows

Gary North weighs in:

I begin with a statement. Would you say it sounds Keynesian?
The continuing slowness of economic growth in high-income economies has prompted soul-searching among economists. They have looked to weak demand, rising inequality, Chinese competition, over-regulation, inadequate infrastructure and an exhaustion of new technological ideas as possible culprits.
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. Some of the recent headlines about Iraq or South Sudan make our world sound like a very bloody place, but today's casualties pale in light of the tens of millions of people killed in the two world wars in the first half of the 20th century. Even the Vietnam War had many more deaths than any recent war involving an affluent country.
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 sounds Keynesian to me. The fact that it appears in The New York Times also leads me to conclude that it is Keynesian.

But, no, the author assures us, this is not Keynesian at all. "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."

If it walks like a duck, and it quacks like a duck, it takes a lot of evidence for me to conclude that it is not a duck. When it is in the The New Duck Times, that pretty well confirms it.

He goes on.
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.
Does this make sense to you? It makes no sense to me.

It was written by Tyler Cowen, who teaches economics at George Mason University. He is regarded as a free market economist. I do not know why.
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.
Yes, we can. Quite easily. You would be hard-pressed to find a war in American history that did not raise taxes, raise debt, and kill innocent people. 


  1. Cowen's argument seems to presuppose that the purpose of economic activity is to generate economic growth statistics. In my view, the purpose of the economy is to use available resources in such a way as to optimally match up with consumer preferences. One would suppose that most people strongly prefer not to be cannon-fodder for the elites or to see their friends, family, and neighbors or even humans in general in that role. Depending on their circumstances, individuals may prefer leisure and family pursuits to being scare-mongered into producing more measurable economic activity. Cowen appears to see economic models as an end in themselves rather than as tools to support human flourishing.