Monday, 17 July 2006

No thought on welfare

John Maynard Keynes is not dead; he's alive and well and being recycled at a blog near you (which wishes to remain anonymous) with 'ideas' such as this:
Welfare isn't paid out and then lost. It is one of the reasons we have near-full employment. It is guaranteed spending within the economy that props the economy up in bad times, and causes it to surge ahead in good times.
There are many ways to describe all the problems with this, but four words spring immediately to mind: politically and economically ignorant.

Do I really need to explain why? Two starting points if you want to work it out for yourself:
  1. "near-full employment" is not the way to describe nearly 300,000 people being on a benefit;
  2. taking from the productive to give to the unproductive does not "prop up the economy in bad times (though it might and has made the bad much worse, and the times in which bad happens more common), and it does not "cause [the economy] to surge ahead" in the good.
'Surging ahead' is not something done by the unproductive. It is something the productive do when the unproductive get out of their way long enough. You'd think some people might know better. In fact, if the unproductive truly realised how reliant they are on the productive, they might want to think about saying "Thank you" for being kept alive.

TAGS: Economics, Nonsense, Welfare


  1. Parable of the broken window. And regardless, any Keynesian effects that may occur would happen regardless of who spent the money. If you feel like meddling further you could introduce some pro-consumption laws. No gains, sorry.

  2. Isn't it ironic that, in a world of perfect knowledge (ie an assumption of capitalism), all economic systems are zero sum games.


    "...politically and economically ignorant..."

    How about: logical and historically proven.

  3. polemic - Maybe you missed this post by PC.

  4. 'logical & historically proven'.

    How? Where?

    More like 'soulless and guaranteed to grow bureaucracy'.

  5. Thank's Brian, I did miss it :)

    Sus: Great Depression?

    Yes, there is associated bureaucracy - the downfall can be in the execution - but I'm not quite sure what you mean by soulless. The desire to help people through welfare, although misguided (in your opinion), does not strike me as an inhumane one.

  6. Polemic: I use the term 'soulless' in connection with 'state' welfare, because I don't, for a second, believe it's about *care* ... I believe it's about *control*.

    And that's a world of difference.

    This is a fundamental tenet of libertarianism. 'Welfare' should be voluntary. Human beings are generous by nature - there's your humanity .. no argument there - and I would rather have my money back so I can support the charities and causes of my choice, rather than have a truckload of money stolen from me, and dished out politically, about which I have no say. That's after the bastards have kept a heap for themselves, of course.

    This govt has grown govt by some 11% since taking office. There has been no corresponding improvement in services, ie, a reduction of 11% in public hospital waiting lists or an 11% growth in numbers of public schools - which just goes to show that govt is in the business of growing govt.

    Nothing more, nothing less. But when you've got people by the fiscal short & curlies, you've got them controlled.

  7. "Sus: Great Depression?"

    Polemic: The great depression was only made 'great' by use of the flawed economic thinking I pillory above.

    You can't confuse consumption with production. Capital going to production increases capital, which produces more capital and more production. A benevolent spiral is the result.

    Capital going to consumption however is consumed, and ends there. And increasing consumption without increased production is the sure sign of capital being destroyed.

    The great depression from 1929 to 1940/45 was an example of the latter.

    What Hoover did from 1929 to 1932, and the New Deal did on a larger scale from 1932 to 1940 shackled the productive while stealing from them to pump up consumption. The onerous and unpredictable government meddling imposed on producers savaged private investment, and on top of that the money stolen from producers to pump up consumption deprived producers of the profits they had earned (which also deprived the economy of this productive use of capital), and instead sent that money down a consumption drain.

    The policies of the Hoover and the later New Deal (which were not dissimmilar except in scale) did more than anything else to extend the depression for more years than were necessary, and at its nadir in 1937 worse than when those policies began.

    There are many good readings on this. Three of the most directly relevant here might be:

    1. George Reisman's 'Production versus Consumption.'
    2. 'Great Myths of the Great Depression,' by Lawrence Reed; and
    3. 'Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War' by Robert Higgs.


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