If you’re on the road at all this holiday season, be on the lookout for a few things. First, look for enormous amounts of unused and/or decaying productive capacity. You’ll see plenty along the way from Memphis to Birmingham, but I suspect this isn’t the only route along which you’ll see lots of crumbling buildings and rusting cars. Second, be on the lookout for boxes and piles of unused junk–tchotchkes of Christmases past in particular. Third, if you go shopping, be sure to look for trinkets and baubles with which you might stuff various stockings but which will likely end up in one of the aforementioned boxes and piles of unused junk next Christmas.
It’s easy to observe these and say that the macroeconomic problem is insufficient aggregate demand in the face of sticky wages and prices. I think that’s superficially appealing, but I don’t think it’s right. On closer inspection, I think it’s clearer that what we’re observing is a massive misalignment between what has been produced and what would actually make people happy.
Why aren’t prices adjusting, and why aren’t resources being repurposed and redeployed more rapidly? I think one reason is that we have lots of laws and restrictions that prevent it. In this light, listen for pleas to give money to this or that organization that seeks to alleviate poverty in developing countries by distributing chickens, goats, sewing machines, or water buffaloes. These probably help a little bit, but the most valuable thing you could probably give one of the world’s poorest people is a Green Card or a U.S. passport. I agree with Tyler Cowen that we have picked a lot of low-hanging fruit, but I think one way to help fix our long-run economic woes is to grow more low-hanging fruit. International free trade in labor is one way to do this.
Is the road to prosperity paved with Chia planters shaped like President Obama’s head (HT: Elizabeth Douglas)? Almost certainly not, unless they are ground up and mixed with paving materials. The policies of macroeconomic stabilization combined with restrictions on trade are preventing the emergence of what Arnold Kling calls “patterns of sustainable specialization and trade.” Or, to borrow from Hayek, the aggregates on which policy is based conceal the fundamental mechanisms of change.
If you’re looking for something to read as Christmas itself approaches, I humbly offer some of my contributions, each of which is short enough to read in a long, long, long line at your local mall, mega-retailer, or independent merchant. Merry Christmas, and may the spirit of Retsyn be with you all year long.
1. “How Economics Saved Christmas.” The conflict between the Grinch and the Whos boils down to one issue: property rights.
2. “Ruining Christmas: An Economist’s Guide.” What you see isn’t what you get during the holidays.
3. “Last-Minute Christmas Gifts: Spectacular? Special? Spirit of Retsyn?” Looking for last-minute gifts? Here are a few questions to answer.
4. “Twelve Clicks of Christmas.” What is wasting your time this holiday season? (“reading this post.” Ouch.)
5. “Christmas and Consumption.” Consumption per se doesn’t create economic growth. Follow the links to classic defenses of Ebenezer Scrooge.