Why Wasteful Spending Is Preferable: Economics is Psychology

I’m not a fan of economics.  I’d rank it well below Freudian psychology as a sociology masquerading as, or yearning to be seen as, a “science”.  Of course, I’m no great fan of the myriad splintered activities we call “science” either.  But that’s a misanthropy in me I suppose.  We are stupid as a species while pretending to be the spit and image (spittin’ image; spittoon image) of the mighty All of Choose Your Faith.

That said, Krugman is nearly always enlightening as an explicator of the machinations of political economics (economics made to fit your politics).  In his column of 10/30, brought to my attention by Kevin Flaherty, “Bombs, Bridges and Jobs”, PK does his usual service of pointing out the logical illogic of Republican thinking on spending as a social good.  Hit the link to read the set-up; I just wanted to highlight the psychological bits.

First things first: Military spending does create jobs when the economy is depressed. Indeed, much of the evidence that Keynesian economics works comes from tracking the effects of past military buildups. Some liberals dislike this conclusion, but economics isn’t a morality play: spending on things you don’t like is still spending, and more spending would create more jobs.

But why would anyone prefer spending on destruction to spending on construction, prefer building weapons to building bridges?

John Maynard Keynes himself offered a partial answer 75 years ago, when he noted a curious “preference for wholly ‘wasteful’ forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” Indeed

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. Spend money on some useful goal, like the promotion of new energy sources, and people start screaming, “Solyndra! Waste!” Spend money on a weapons system we don’t need, and those voices are silent, because nobody expects F-22s to be a good business proposition.

To deal with this preference, Keynes whimsically suggested burying bottles full of cash in disused mines and letting the private sector dig them back up. In the same vein, I recently suggested that a fake threat of alien invasion, requiring vast anti-alien spending, might be just the thing to get the economy moving again.

Aside from this being funny in a way that brings tears of pain rather than joy, I wanted to just ask one question based on the phrase that I highlighted above.  First, of course it’s a morality play: choosing to describe and predict economic events based on particular criteria is a model of social morality.  The question is though, why shouldn’t we frame it just this way?  Capitalism is an ethical system of valuation.  Rather, it is an unethical system; but it is an ethics and we operate within a moral framework given to us by this system.

Once we agree to this, all we have to do is alter our criteria to fit a different ethical system of valuation.

We simply need to assert a different idea for “bottom-line” profiteering and then our economics might actually operate within a more humane and ethical morality.

This is what Bhutan is trying: Gross National Happiness.

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