Professor Steve Horwitz has a great article on today’s FEE in Brief, sent out by the Foundation for Economic Education. He takes on a rather silly and naive blog post by Paul Krugman which makes the claim, and from an economics perspective the sophomoric error, that war is wealth creating. Horwitz also takes on Krugman’s claim that economics is amoral and therefore it is perfectly ok for economists to suggest that war, in extreme circumstances, might be a good anti-recession policy. Horwitz devastates Krugman’s arguments:
When…we borrow from future generations to spend on goods and
services connected not to the desires of consumers, but rather to the
desire of the politically powerful to rain death and destruction on
other parts of the world, we are not allowing individuals the freedom to
do the things they think will make themselves better off. And we are
certainly not extending that freedom to those killed in the name of our
economy-enhancing war. At a very basic level, the idea that any kind of spending is desirable overlooks the fact that spending on war (and, I would argue, public works as well) actively preventsSending soldiers off to war…is almost by definition wealth-destroying, no matter what it does to
GDP or unemployment rates. The only way one can view economics
amorally, as Krugman wishes to, is if one is only concerned with total
GDP and not its composition. However, it is the composition of GDP, in
the sense of how well what we?ve produced matches consumer wants, that
ultimately matters for human well-being. It?s easy to create jobs and
generate spending, but those do not constitute economic growth, and they
are not necessarily indicators of human betterment. people from enhancing their wealth through production and exchange linked to consumer demand…
