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.
{ 6 comments }
“the most valuable thing you could probably give one of the world’s poorest people is a Green Card or a U.S. passport”
Give out enough of these, and the country will reflect the poor person’s country of origin. Enough of this cultural Marxism. That said, Happy Christmas to all!
Prior to opening up immigration the we must eliminate almost all forms of social welfare. That way the vast majority of people you end up getting are ones that want to work and provide value to society.
nate-m,
I’m actually under the belief that the majority of immigrants “want to work and provide value to society”.
Though I haven’t done any research or statistical analysis, my experience working with people on welfare (20-30% of my students) is the vast majority of those are second, third, fourth etc., generation Americans.
This has led me to believe that welfare is a learned behavior and not a motivating behavior. In other words, people don’t to come to the US because of our welfare system.
I’m not sure the opportunity cost would justify it and even if it did…cultural and language barriers along with intense paperwork and scrutiny (i.e. bureaucracy) create huge obstacles in gaining access to the welfare system.
I really believe the idea of the lazy immigrant is a myth.
Nate, I agree…we need to eliminate all forms of social welfare but I would start with corporate welfare first. I have far less empathy for people who have malinvested millions of dollars verses people trying to house and feed their family.
Nate, I hope you have a wonderful day and a very Merry Christmas.
I don’t besmirch immigrants as people, nor impugn their work ethic. I do believe, notwithstanding all stifling political correctness, that Michael Levin is quite right, that time preferences are hard-wired by environmental influences, and so are not able to be addressed by nurture alone. South America is an exemplary case. The areas where the Japanese, Dutch or Germans settled remain the advanced hubs. The areas where the African slaves form the predominant population have lagged well behind, and this is centuries after slavery. Decades of Marxist redistribution and free education haven’t put a dint in this. Not every one is equal is a physiological sense, even if they are in the moral one.
Spain has the same issue with the Gypsies, though most Iberians are wise to the fact that assimilation is not part of the Gypsy culture, and why should it be?
It’s not just about economics, anyway. Mises knocked the homo œconomicus cliché over years ago.
I like what you’re saying, but I’m not sure I like some of your examples. Isn’t it a dangerous practice for the economist to criticize the purchasing patterns of individuals? Doesn’t praxeology lead us to the conclusion that cheap baubles and presidential Chia Pets, as long as they aren’t subsidized or protected by the government, may very well be atop an individual’s value scales, and are thus just as valuable as anything else? In other words, I don’t quite see the connection between the unused productive capacity that has resulted from government induced malinvestment, on the one hand, and the silly, cheap trinkets people sometimes like to buy, on the other.
Praxeology leads us to the conclusion that glass baubles may be atop someone’s subjective value scale, but since all values are subjective this is irrelevant to the values of anything else. Praxeology doesn’t make judgements based on that subjective value, but since the economist employing praxeology has his own subjective values he can’t help BUT make a judgement on that resource-use, as this is integral to him being an acting and economizing human being.
Comments on this entry are closed.