24 ms·

"The last time the economy was in this bad of shape, it took a world war to restore prosperity." Pros and cons of basic income aside, this is likely what we ar

by jboggan 11y ago

"The last time the economy was in this bad of shape, it took a world war to restore prosperity." Pros and cons of basic income aside, this is likely what we are seeing already. I don't know how else to describe a proxy conflict in Syria with U.S., Russian, Chinese, and Cuban actors. On the main topic of the piece, the danger of inflation is just waved off and the function of creditors ignored. How would say the Chinese government feel about significant inflation that makes our Treasury debt more easily repaid with devalued dollars? These kinds of considerations loop back to the first point.

Diamons 11y ago
I've heard this many times before and I've even been taught this in history class. What is the reason for this? The explanation is often that it stimulates the economy, but really, is war effective at fixing the economy because it just acts as a giant reset button? If there's too many workers and not enough job, the easiest way to fix that problem is to kill X% of the population, and what better easier and cleaner way to sell this to the American people than your country is under attack and it needs your sacrifice?
- derefr 11y ago
  I don't think the deaths are the most important thing; rather, it's the absences: • Presume that a job market contains people with job-skills, and people without (i.e. "lemons"). • Presume that businesses function better when they can select from a talent pool with fewer lemons; and that lemons in a job market create "noise" in the hiring process that cause openings to go unfilled for longer. • Now, presume either a draft (which doesn't care about job-skills, but does care about age, tending to select for younger people with fewer job-skills), or simply a military with lower job-skill requirements for entry than most occupations. Thus, a military on a war footing will selectively withdraw more lemons than non-lemons from the job market, leaving it full of higher-quality candidates, making the businesses in that market more efficient. For this hypothesis to be accurate, the same thing would have to happen if we just gave all the people being sent to war public-sector jobs (or Basic Income) instead. Though that would perhaps work better than a war for stimulating the economy: people remaining in the country would be spreading their demand across the market, rather than consuming goods exclusively from the military's line-of-supply contractors.
  - Retra 11y ago
    The military doesn't have lower skill requirements than the average job. It does have very large and expensive training programs to make up for that.
    - TeMPOraL 11y ago
      Which looks the same at the input end of the process - they'll suck up anyone with four limbs and both eyes, regardless of the skills they have prior to enrollment.
  - darkmighty 11y ago
    Attributing all WW economics to HR hiring noise is a bit of a stretch, I think. There are many other factors, from psychological "we must produce maximum to guarantee victory" to huge belic investments leading to advances in key technologies.
chipsy 11y ago
In truth, we don't have a very good picture of how to model the inflationary effects of BIG, except by crudely analogizing one demand increase with another. IMHO the main thing to keep in mind is who immediately gets money as a direct consequence of a policy change, what they feel obligated to do with it, and how that might turn into a bottleneck later. Traditionally when money is "pumped into" a economy, it's via lending to banks(producing a "multiplier" effect). That money lands in the hands of the biggest capital-holders first - big businesses, investment firms, etc., so it acts to stimulate supply more than demand. The hope is that firms will see the easy money as a signal to expand their operations and take on bigger projects. If it doesn't work - and efforts like QE have basically stopped working - all you're going to get is greater inequality of wealth, as the money stops being put to use and feeds itself back into the capital markets. And when we stimulate demand in the fashion done in the post-war era, with a huge expansion of government spending, the money is mostly landing on people building war machines and associated technologies. People are being employed and paid, but they're locked into employment of a certain nature which isn't directed at consumers - so more money is chasing a broadly similar basket of goods. The late 60's and 70's saw rapid inflation, and the technical advances and new markets that opened up from that period to today are pretty much all rooted in that early investment in military R&D. On the other hand, when you have money land directly into the hands of consumers, that money is only skewed by cultural values. They could go Kickstart some wacky project. They could push for higher quality goods. They could pay off debts, change residences, and go back to school. Consumers aren't purely profit-seeking or utilitarian - how the macro situation would change is one huge unknown, but the main point of appeal is that it would be a very fluid kind of demand, and if consumers start disliking their ROI in one category, they can smoothly transition to something else - which means the traps and bottlenecks of other policy changes may not apply.
TeMPOraL 11y ago
I think an actual war (as opposed to the stuff US is doing in Iraq and Afganistan), in which you and your family could get hurt, does wonders for productivity because it forces people to keep things real. There's less time and will for graft and bullshitting, you need to work because your survival depends on it.

by jboggan 11y ago

Diamons 11y ago

I've heard this many times before and I've even been taught this in history class. What is the reason for this? The explanation is often that it stimulates the economy, but really, is war effective at fixing the economy because it just acts as a giant reset button? If there's too many workers and not enough job, the easiest way to fix that problem is to kill X% of the population, and what better easier and cleaner way to sell this to the American people than your country is under attack and it needs your sacrifice?

derefr 11y ago
I don't think the deaths are the most important thing; rather, it's the absences: • Presume that a job market contains people with job-skills, and people without (i.e. "lemons"). • Presume that businesses function better when they can select from a talent pool with fewer lemons; and that lemons in a job market create "noise" in the hiring process that cause openings to go unfilled for longer. • Now, presume either a draft (which doesn't care about job-skills, but does care about age, tending to select for younger people with fewer job-skills), or simply a military with lower job-skill requirements for entry than most occupations. Thus, a military on a war footing will selectively withdraw more lemons than non-lemons from the job market, leaving it full of higher-quality candidates, making the businesses in that market more efficient. For this hypothesis to be accurate, the same thing would have to happen if we just gave all the people being sent to war public-sector jobs (or Basic Income) instead. Though that would perhaps work better than a war for stimulating the economy: people remaining in the country would be spreading their demand across the market, rather than consuming goods exclusively from the military's line-of-supply contractors.
- Retra 11y ago
  The military doesn't have lower skill requirements than the average job. It does have very large and expensive training programs to make up for that.
  - TeMPOraL 11y ago
    Which looks the same at the input end of the process - they'll suck up anyone with four limbs and both eyes, regardless of the skills they have prior to enrollment.
- darkmighty 11y ago
  Attributing all WW economics to HR hiring noise is a bit of a stretch, I think. There are many other factors, from psychological "we must produce maximum to guarantee victory" to huge belic investments leading to advances in key technologies.

chipsy 11y ago

In truth, we don't have a very good picture of how to model the inflationary effects of BIG, except by crudely analogizing one demand increase with another. IMHO the main thing to keep in mind is who immediately gets money as a direct consequence of a policy change, what they feel obligated to do with it, and how that might turn into a bottleneck later. Traditionally when money is "pumped into" a economy, it's via lending to banks(producing a "multiplier" effect). That money lands in the hands of the biggest capital-holders first - big businesses, investment firms, etc., so it acts to stimulate supply more than demand. The hope is that firms will see the easy money as a signal to expand their operations and take on bigger projects. If it doesn't work - and efforts like QE have basically stopped working - all you're going to get is greater inequality of wealth, as the money stops being put to use and feeds itself back into the capital markets. And when we stimulate demand in the fashion done in the post-war era, with a huge expansion of government spending, the money is mostly landing on people building war machines and associated technologies. People are being employed and paid, but they're locked into employment of a certain nature which isn't directed at consumers - so more money is chasing a broadly similar basket of goods. The late 60's and 70's saw rapid inflation, and the technical advances and new markets that opened up from that period to today are pretty much all rooted in that early investment in military R&D. On the other hand, when you have money land directly into the hands of consumers, that money is only skewed by cultural values. They could go Kickstart some wacky project. They could push for higher quality goods. They could pay off debts, change residences, and go back to school. Consumers aren't purely profit-seeking or utilitarian - how the macro situation would change is one huge unknown, but the main point of appeal is that it would be a very fluid kind of demand, and if consumers start disliking their ROI in one category, they can smoothly transition to something else - which means the traps and bottlenecks of other policy changes may not apply.

TeMPOraL 11y ago

I think an actual war (as opposed to the stuff US is doing in Iraq and Afganistan), in which you and your family could get hurt, does wonders for productivity because it forces people to keep things real. There's less time and will for graft and bullshitting, you need to work because your survival depends on it.