Ed Morrissey at Hot Air draws our attention to this jaw-dropping video segment of Nobel Prize-winning economist Paul Krugman citing the plot of a Twilight Zone episode to explain how we could solve our fiscal problems:
Fareed Zakaria: Wouldn’t John Maynard Keynes say that if you could employ people to dig a ditch and then fill it up again, that’s fine, they’re being productively employed, they pay taxes, so maybe Boston’s Big Dig was just fine after all.
Paul Krugman: Think about WWII, right? That was not, that was actually negative social product spending, and yet it brought us out [of the Depression]. I mean partly because you want to put these things together, you say, ‘Look, we could use some inflation,’ Ken and I are both saying that, which is of course anathema to a lot of people in Washington, but it’s in fact what the basic logic says.
It’s very hard to get inflation in a depressed economy, but if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So that if you think about using all of these things together, you could accomplish a great deal.
If we discovered that space aliens were planning to attack, and we needed a massive buildup to counter the space alien threat, and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months.
And then if we discovered, ‘Whoops! We made a mistake. There aren’t actually any space aliens,’ we’d be in better —
Ken Rogoff: So we need Orson Welles is what you’re saying.
Paul Krugman: No. There was a Twilight Zone episode like this, in which scientists fake an alien threat in order to achieve world peace. Well, this time we don’t need it [to achieve world peace]; we need it in order to get some fiscal stimulus.
And I thought to myself: This guy Krugman may be on to something! Could it be that all the solutions to America’s financial woes can be found in Twilight Zone plots?
Say, for example, if we genetically engineered an evil little boy with telekinetic super-powers (played by Billy Mumy, of course) — then could he just wish all the Tea Partiers “to the cornfield” if they didn’t stop yammering about taxes?
Or maybe we could build a fortune-telling machine that accurately predicted what the stock market was going to do tomorrow, and then make a fortune by betting on all the right stocks?
Or how about this: We create a huge government optician monopoly to manufacture millions of coke-bottle eyeglasses, and then made a profit selling them to all the Burgess Meredith lookalikes who break their lenses after the upcoming nuclear holocaust?
Think of the possibilities!
Readers are invited to devise their own Twilight-Zone-inspired economic theories.
Paul Krugman, you genius! Your brilliant ideas might save this country after all!
UPDATE: Drat! Turns out Paul Krugman blundered spectacularly — the plot he’s thinking of actually comes from an Outer Limits episode called “Architects of Fear.” So it could be that America’s salvation may not necessarily be found in The Twilight Zone exclusively, but in The Outer Limits as well. Economic theorists, take note!
Um. The episode where the girl gets plastic surgery, but it just doesn’t help, she stays gorgeous – everyone else has pig-noses?
Plastic surgery for all? I grant, I don’t think it would really provide much of a Keynesian stimulus. Better that, however, than the couple that find themselves pets in a kid’s dollhouse.
How ’bout plastic surgery piggy-noses for all politicians?
Truth in advertising combined with Twilight Zone. What’s not to love?
All seasons of the original half hour Twilight Zone series (1,2,3,5) are available for instant viewing on netflix. Not having seen this episode after watching pretty much all episodes over the weekend, I thought it might be one of the season 4 hour episodes, but no : It’s actually an Outer Limits episode called “Architects of Fear”. Just FYI for anyone who thought, “Hey! Stupid economic theory, but sounds like great viewing!” Tragically, Outer Limits is NOT available for instant viewing. And TZ season 4 isn’t, either, nor is it available for rental, though you can buy that season….So why isn’t it available for rental?
Great catch! I have noted your new info in an update to the post.
Krugman doesn’t get much right does he?
My gosh. “We control the horizontal, we control the vertical.” The perfect left-wing slogan. How could Krugman have possibly been confused about that?
“…again, that’s fine, they’re being productively employed…”
There’s the problem – they are not being “productively” employed and that is what a lot of Keynes groupies forget. Busywork is not productive and only ties up resources (the labor an materials used in busywork) that could be better put to use actually growing the economy. In fact it really has a negative overall impact since the money wasted has to come from productive sectors.
In fact, I doubt Keynes would even say something that stupid.
Just to be clear, WWII did not stop the Depression, except if you use the idiotic definition of GDP growth that has been foisted by these government con men on the country.
At the end of WWII, the lifestyle of the average American was no better than before the war, and the only reason it wasn’t even worse is that the governemnt had borrowed more than the GDP to build weapons and provide 20 million servicemen three hots and a cot. GDP, of course, looked great because of the borrowing that has only been matched by the current Idiot in Charge.
Running in place does not solve economic problems. Building tanks does not solve economic problems. It’s plainly obvious to any child. The only thing that solves economic problems is a genuine increase in wealth.
And that is what happened AFTER WWII. Since every other economy in the world was flattened and would take decades to rebuild, the US was the only country in a position to develop the goods and services the rest of the world needed. So our wealth soared, for decades.
If Krugman actually believes his words, he is a bigger idiot than anyone imagines.
And to be clear about GDP, it is simply a measure of economic activity, not wealth creation. If government spending wasn’t included in GDP, it would be a decent proxy for increasing wealth (once adjusted for inflation), but since government spending is included, it’s a con. For example, ALL OF THE GROWTH IN GDP UNDER LITTLE LENIN IS GOVERNEMNT SPENDING, which as you know has been make possible by 5 Trillion in government borrowing. Which, in turn, guarantees that your lifestyle in the future is going down. WAY DOWN.
WWII solved the unemployment problem by putting young men in the military and older men and women in war factories. So it was an improvement.
My theory on why we prospered afterwards was, we cleared out the underbrush of regulations, and incompetent administrators in government and business were fired because suddenly results were a life and death matter.
The way to emulate this today is easy. Create a new Red Scare about Russia and China, and add it to the big scare about Islam for good measure. Then order every weapon system the Pentagon wants in the numbers they want. Pay for it by drastically cutting the size of the social service machine which will not be needed because all the recipients of wealth transfer will be in the military or a defense factory. Clear out all regulations, get rid of many regulatory agencies, and have drastic tort reform. All for the war effort, of course.
No only will this jump start the economy, but we can use the beefed up military to shock and awe the whole of Islam into submission after the Marines seize the oilfields in the western Gulf of Persia because they are financing a war against us and therefore a fair target, ending our energy crisis. We won’t have any trouble from Russia or China because the buildup will make us stronger than both of them combined and we’ll have a working ABM system, which will end the nuclear stalemate.
In a way, Krugman is right; we haven’t been thinking big enough. ;^)
Solving the unemployment problem didn’t solve the Depression. If you put 20 million people out of a 150 million population in the military, plus the need for hundreds of thousands of tanks and planes, you aren’t going to have any unemployment, but the borrowing to do so is huge and causes other problems. No other country had any unemployment during WWII either.
We could do the same in the US today. Conscript the 20+ million unemployed into some national workforce, and like Krugman says, have them move rocks from one side of the road to another. All that will do is destroy the country because the debt created by that would be even more huge than Little Lenin has run up.
In WWII, putting men in the military solved another problem…Hitler, but it HURT the economy, it didn’t help it. People has LESS in 1946 than they had had in 1939. If nothing in the world had changed except removing Hitler, then it would have been back to 1939, except with a massive amount of new debt and even lower lifestyles.
But like I said, the US was the only country still capable of producing the goods and services that the world needed after WWII, and that is what caused the economic boom. We could have employed many more people in the US, but didn’t have the people, so the prices we could charge for those goods and services went up and the country prospered.
It also helped that the country was filled with optimism and confidence and that many of the WWII vets got educations that they then used to innovate and invent things that people wanted to buy.
There’s also another side-benefit to military “make-work schemes” as opposed to the Keynesian “dig a ditch and then fill it up again” proposals:
When money is “wasted” on massive military projects, such as war, arms races, etc., it often results in technological breakthroughs that would not have been possible in an over-regulated “regular” economy. The most obvious example is nuclear power: Although the principle behind it had been around since 1905, there was no rush to develop the technology (mainly because oil and coal were so cheap back then) — until the US got paranoid that the Germans were making an atomic bomb and that if they got it before we did, or before the war ended, the Germans could actually end up winning. So the Manhattan Project went into overdrive and we devoted massive resources with all regulations swept aside and no expense spared to get controlled nuclear reactions working. Turns out we beat the Germans with conventional forces before we even finished the nuclear project, but after the war we then turned the new-found knowledge and expertise and engineering skills into a domestic nuclear-power industry.
Now imagine if none of that had happened, and that we had never rushed in a wartime emergency to harness nuclear energy, and then fast-forward to a hypothetical nuclear-free 2011. Some scientist says, “Say, I’ve got new idea for cheap power to replace the oil economy: controlled nuclear reactions!” Well, aside from being laughed off the stage, the number of repressive environmental regulations currently in place would make development of that concept nigh-on impossible.
There are plenty of other military-derived breakthroughs: ARPANET (which gave us the Internet) and space exploration (both leftovers from the Cold War), jet travel, and so on.
In this way, one can view military expenditures as a component of “basic R&D,” or even as infrastructure spending — and thus it’s not nearly as useless as Keynes’ ditch-digging schemes.
You’re right of course, but military innovation isn’t what turned the US economy around after WWII.
Being the only country still standing did it.
And even bringing the point up, in my opinion, is somewhat misleading because it’s so easy to twist into a reason for the loons’ “green energy” black holes, and other lunatic programs. Despite the success of Apollo, the government simply can’t compete with the private economy as an innovation engine, and for a very logical reason. The governent, by nature, makes big bets. Private business, by nature, makes many more bets and but much smaller one. Since most innovation bets fail, the government usually fails, big-time, whereas private businesses continually create successful innovations. The reason Apollo was successful might be as attributable to capturing the Nazi rocket technology as anything else, but there are no end to Steve Jobs’s, unless you drive them out of business.
But also as you say, in time of war, the big bets are often necessary. Nuclear energy might still be a dream were it not for WWII.
One last point is that I suppose one can make an argument that we are at the point in history where the remaining major innovations require the kind of massive innovations that only big governement can make. But I’ll believe it when I see it. So far, that hasn’t proven to be true.
We could do the same in the US today. Conscript the 20+ million unemployed into some national workforce, and like Krugman says, have them move rocks from one side of the road to another. All that will do is destroy the country because the debt created by that would be even more huge than Little Lenin has run up.
Not necessarily. We’re already paying millions of people welfare and unemployment benefits. All we have to do is make work a condition for receiving the benefits. Instead of getting stuff for free, they’d have to actually show up and work for it and it wouldn’t cost any more than what we’re paying now. Every community has a list of things that need to be done but no money to pay for it. By making people on welfare and unemployment do this work, we taxpayers are actually getting something back for our money. If we make the work unpleasant enough, perhaps some of them will become motivated to get a real private sector job.
Nah. The whole point behind life-long welfare recipiency is that it allows you to avoid work altogether. If you made working at manual jobs a prerequisite for getting welfare, then I submit that most current welfare recipients would simply drop out of the program altogether. Better to work on your own terms than to allow the government to make you do something unpleasant like picking up litter along the freeway, or break rocks in the hot sun.
Those dropping out of the welfare spectrum due to these new requirements will like fall into one of five categories:
1. Get a real job.
2. Get an underground economy “job” (drug dealer, thief, con artist, etc.)
3. Get a grey-market tax-free job (under-the-table cash-only day laborer, etc.)
4. Become a small-time entrepreneur (open a taco truck, do nail care, etc.)
5. Go hungry.
What drives liberals crazy is that last category. They can’t tolerate that anyone go without, so in order to mollycoddle these last few ultra-lazy whiners, they bankrupt the whole system and enslave millions with welfare dependency.
Bu in truth, that last category is vanishingly small. People will do anything to survive, and if the handouts are taken away, and they refuse to work, when that stomach starts grumbling — you do what it takes to fill it, whther you’re happy about it or not.
Frankly, I’d rather have 20 million people supporting themselves with grey-market jobs or small-time micro-businesses, legal or illegal, than have to support them myself with my tax dollars.
So, actually, I very much like your “work for welfare” proposal, not because it would succeed at making people do government work for their welfare checks, but that it would drive most of them off the welfare rolls altogether.
(I will say, that my inner liberal insists that certain categories of welfare recipients be exempt from the “work-for-welfare” requirements: Severely physically disabled people; retired seniors, etc.)
@Zombie
(I will say, that my inner liberal insists that certain categories of welfare recipients be exempt from the “work-for-welfare” requirements: Severely physically disabled people; retired seniors, etc.)
We have disability programs. If they were not abused and run sanely, I doubt that many would object to them, and they would not be that expensive. However, a friend of my wife lives on disability, yet regularly does her own major home repairs, and has just gotten back from a 4 month vacation in Germany, and is making money selling her paintings. As much as my wife likes her, I have to admit that she is scamming a system for people who are truly disabled. She is a RN and could get a high paying job tomorrow if she wanted. That no one is for stuff like that except “victims” like her.
Old people paid 15% of their income into social security and medicare and it is not a hand out. It is a government run retirement program. It is also a contract that needs to be honored. That 15%, had they invested it wisely, would have left them with far more than they get from the government. It is not their fault that it is run by idiots and Congress squandered the money in the trust fund.
I doubt many people would object to helping the truly handicapped. However, even then there are limits. My oldest brother lost about 90% of the use of his hands due to a cyst on his spinal cord. At age 63, he still managed to make a meager living as an auto mechanic diagnostician. He has not applied for disability assistance even though it would make his life much easier. My wife’s best friend is married to a retired Army soldier who is paralyzed with MS and living in a nursing home. He is truly handicapped. Between SS and the VA, he (actually she) gets $10,000 a month tax free. All of his medical expenses including the nursing home are paid and his wife gets a new handicapped equipped van every 3 years or so. While I wouldn’t want to trade places with him for anything, I do believe $10K a month tax free is excessive especially when that’s over and above all of his medical expenses.
I like your idea, and it would create some value if it were managed properly (a BIG if) but I don’t think it would help revive the economy. The only thing that will do that is innovation.
As I’ve said in other streams, service jobs are useful but not really stimulative. Wealth is only created when something new and desirable is created, and unless wealth is created, an economy simply treads water. And people sense that too. In other words, you fix my roof and I cook you meals for a month. That’s useful work and it may allow both of us to do things we like rather than dislike, but it won’t make either of us richer. But, if you figure out a way to fix my roof for the price of one meal, that’s innovation. I’m wealthier for it, because I saved enough labor to cook 29 more meals. And you will get rich because the world will beat a path to your door.
I was hoping the last line would give away that I was satirizing Krugman’s position in a manner that would make Lefties choke on their tofu burger.
“In a way, Krugman is right; we haven’t been thinking big enough. ;^)”
~ ~ ~
If $1.2 trillion/year in deficit spending isn’t stimulus enough, I don’t know what is. The last few years have to be proof it doesn’t work.
I really believe the opposite tack is what we need. Cut government spending, close whole sections of the Government, get rid of regulations and the agencies that create and enforce them, tort reform, and tax reform. I believe we should outlaw income tax at the Federal and State levels and replace it with a general sales tax on everything, and close most of the IRS. I love the idea of replacing SEIU janitors and Mexican fruit pickers with welfare moms who have to work for their checks. The only way to cut government spending is to make it smaller.
There was a Tom Baker-era episode of “Dr. Who” where the villains were a pack of scientists intent on taking over the world and instituting “rational, scientific governance”. I believe they were planning on using a giant robot to terrorize the world into submission.
The sad thing is, just 35 years ago those types were the villains. Today they’re writing for the editorial pages of supposedly the most prestigious paper in the country.
Krugman–downgrading his Nobel every day.
Well, there’s also the Theodore Sturgeon short story where a scientist fakes an alien attack to get get the nations of the world working together. That may have been the inspiration for that “Outer Limits” story. On the other hand, as Glenn Reynolds pointed out, space aliens like John Ringo’s Posleen would not do us too much good, no matter what the governments spent.
We’d have done fine after we killed off the Posleen, if we’d just got rid of the Darhel, too!
Couldn’t resist, sorry. Loved those books until he started trying to work with Julie Cochrane.
I think the current administration is treating the economy just like the TZ episode with William Shatner and the small devil fortune machine.
Everyone thinks that the next answer that pops out of the devil machine will be the answer to all our problems, and everything will be just fine. So we keep popping in pennies, waiting for the right answer.
And the right answer never comes out.
The right answer is not to play the game, but to think for yourself and make your own decisions. Does anyone honestly believe that economic growth can come from some sort of magic government program, like fighting space aliens? Tell me again – did Krugman really get a Nobel prize for his load of BS?
Shatner. Now there’s a guy that can read a teleprompter. He should take over Barry’s remaining 14 months just for the speeches. Too bad he’s Canadian.
An interesting coincidence there. Some rednecks out here refer to African-Americans as “Canadians”, since to use the word that is in their heads would get them in trouble. Since no cares if you hate all the darn lazy Canadians, these bigots get away with it around people who don’t know their code. I grew up near Canada and never me a Canadian who wasn’t nice and hard-working, so it puzzled me until someone explained to me that it was just a code.
Shatner would make a better President than Martin Sheen, at least.
“(I will say, that my inner liberal insists that certain categories of welfare recipients be exempt from the “work-for-welfare” requirements: Severely physically disabled people; retired seniors, etc.)”
Why do we need a welfare system, wrought with fraud and vote buying, to do that?
A true charity, limited in resources, will have to make better decisions regarding the validity of cases, rather than folks gaming the system. More importantly, a charity would be answerable to contributors.
Finally: how about making such charitable donation a TAX CREDIT rather than just a tax DEDUCTION. Of course, that would put a lot of government union bureaucrats out of work.