War is good for… what?

By April 11, 2017 No Comments

“War is good for the economy.” Perhaps the ugliest fallacy on the planet. How do we know it’s wrong? Bastiat exploded the Broken Window fallacy long ago: investopedia.com/ask/answers/08/broken-window-fallacy.asp. In more general terms, the economy’s purpose is to improve people’s standard of living. Siphoning off resources to build rockets which are then used to destroy someone else’s resources makes the world poorer (specific players, like military contractors, can benefit but the net overall effect is that we have less stuff and a lower standard of living). In addition to the material losses, war usually brings losses of freedom as domestic spying and internal security measures are ramped up. Clearly war is not “good” for the economy.

Yet, the inescapable logical conclusion of the brand of economics called Keynesianism is indeed that war is good for the economy. This alone should be enough to discredit or at least cast doubt on Keynes. But far too few economists value intellectual consistency or bother to critically examine what their textbooks told them. Instead, they follow Keynes in substituting shallow catch phrases for actual thinking. Thus war can be good for the economy even though it has a “negative social product”. Got that? Social product, presumably the very thing the economy is supposed to INCREASE, can DECREASE in a good economy. In fact, that very decrease in social product is what is DRIVING a better economy. Basically, the harder you step on the gas with your car in reverse, the faster you will move forward.

It is one of the great indictments on academia that an absurdity of this size can survive and propagate on its watch.