Saturday, 18 February 2023

WAR: "Does blowing up millions of dollars worth of resources sound like a good way to fix the economy?


"While it’s true that war can increase aggregate spending (and therefore GDP numbers), consider what happens with the spending. It purchases machines like tanks and artillery which are sent overseas and promptly blown up.
    "Does blowing up millions of dollars worth of resources sound like a good way to fix the economy? When you look past the temporary fluctuations in economic statistics, it’s clear that these policies can only be destructive. If that weren’t the case, the government could improve the economy by building drones which blow each other up over the ocean! ...
    "The mistake that increased spending in itself causes economic growth is known famously in economics as the broken window fallacy. When we spend money on a war, it’s easy to see the upsides such as income to steel manufacturers who build tanks. What we don’t see is the downsides (the alternative way we could have used the steel rather than blowing it up, for example)."

~ Peter Jacobsen, from his article 'Did FDR Create the Middle Class: What is (and isn’t) the Real Cause of Growth?'


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