# How can enormously wasteful enterprises be good for an economy?
**URL:** https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281
**Category:** Great Debates
**Created:** [June 25, 2012, 7:45pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281 "2012-06-25T19:45:20Z")
**Posts on this page:** 20
**Page:** 3
### Author:  [@Simplicio](https://boards.straightdope.com/u/Simplicio)
#### Post date: [June 26, 2012, 12:28pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/41 "2012-06-26T12:28:35Z")
> [@jtgain](#):
>
> I thought the broken window fallacy fell apart because instead of paying a guy to fix your window, you could have not broken the window in the first place and had money in your pocket to, say, buy a new television set.
>
> Now you’ve spent the same amount of money, but also have a working window AND a television set, whereas before you just had a working window. Therefore society had more for the same value.
Which is why the broken window fallacy is a fallacy _in a normal economy_. In an economy with depressed demand, though, you don’t go and buy a TV set, you sit on the cash and both the window guy and the TV guy sit at home, unemployed.
---
### Author:  [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)
#### Post date: [June 26, 2012, 1:07pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/42 "2012-06-26T13:07:19Z")
> [@XT](#):
>
> Really? How do you figure that? Have you ever been unemployed? Assuming you were, did you never buy anything? My guess is you did, assuming you ever were.
Sigh.
Of course the unemployed buy things, but they buy alot less than the employed. I think we all understand that. Please don’t get caught up in the analogy - it’s only an analogy. High unemployment = lower demand.
> [@](#):
>
> I never said you can’t expand markets to those people. You seem to be twisting this debate into a pretzel. What I said, to condense, is that you can’t borrow a ton of money to build an internal market and expect that to pay everything back in any sort of timely manner.
Didn’t say that.
> [@](#):
>
> Simply putting people to work does not solve all problems…the caveat here is what was the problem in the first place that CAUSED the unemployment? Depending on that will depend on whether a stimulus would work or not work. It’s not a silver bullet that fixes all problems.
Didn’t say that either.
> [@](#):
>
> Presumably because you believe that the government can just make (or borrow) an infinite amount of money, and they can do it in perpetuity…and that this solution is a universal elixir of prosperity.
Didn’t say that either.
> [@](#):
>
> It won’t sustain itself in the scenario you laid out.
Why not?
> [@](#):
>
> For a time they might, but eventually it will halt…JUST LIKE IT DID PRESUMABLY BEFORE WHEN THOSE PEOPLE BECAME UNEMPLOYED IN THE FIRST FREAKING PLACE. Sheesh…how did those folks BECOME unemployed? Were they born that way? Generations of unemployed in perpetuity dating back to the stone age or the foundation of the island nation?
How did they become unemployed? Tell me.
You do know that booms and busts are normal and natural, right? They aren’t necessarily caused by external forces or structural problems. And in the short run, it doesn’t matter - the first priority is getting back on our feet, otherwise we can’t solve the long-term problems.
> [@](#):
>
> Let me ask you something…why didn’t the Great Depression end right after FDR took control of the country? I mean, he did just what you are suggesting. Yet the GD went on for nearly a decade. Why? We put people back to work by fiat in various government sponsored programs to build US infrastructure, as well as myriad other things. Yet the GD endured…why? Why did, once we gave all those people jobs, it didn’t start up like a great machine and then run in perpetuity as you are suggesting?
If you look at the numbers, the stimulus measures back then generally worked, until Congress stopped going along with it. Much like today.
> [@](#):
>
> Sure, and we have infinite resources as well. But for PRACTICAL purposes, in the past and to date, the Earth has been an open MARKET. That might change in the future, as every market out there is completely and fully penetrated…in which case we’ll either have to change the model or start trading with those aliens. But for now, we aren’t even close to this and you, I and that mouse in your pocket will not live to see the day where the Earth is a closed system and we have to trade with aliens.
Dude, the earth is a closed system. That’s undeniable. You can’t talk about foreign markets expansion as if they are unlimited any more than you can talk about government spending as unlimited.
> [@](#):
>
> Look, I can see you aren’t getting it, and I don’t have the ability, obviously, to explain it so you can.
If you want to do the standard internet thread ending where you call me an idiot and run away, just do it now. Don’t waste my time any further.
---
### Author:  [@Ruminator](https://boards.straightdope.com/u/Ruminator)
#### Post date: [June 26, 2012, 1:18pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/43 "2012-06-26T13:18:31Z")
> [@don\_t\_ask](#):
>
> What **Keynes** really said in Chapter 10 of _General Theory of Employment, Interest, and Money_:
>
> …
>
> Genius!??
More like idiocy – or to be more charitable, a well-intentioned-but-fundamentally-misguided idea that the movement (aka “velocity”) of money is what sustains an economy. Because Keynes and P Krugman work around government bureaucrats, it’s no surprise they think this way. Expand/invent government works projects, inject a trillion dollars of “quantitative easing” into the economy, etc. That’s their mental toolset.
I’m certain that a future revision of economics that’s based on thermodynamics, game theory, or a hybrid will finally knock down Keynesian and neo-Keynesian economics as the great red-herring of the 20th century.
---
### Author:  [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)
#### Post date: [June 26, 2012, 1:22pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/44 "2012-06-26T13:22:14Z")
> [@](#):
>
> Let me ask you something…why didn’t the Great Depression end right after FDR took control of the country? I mean, he did just what you are suggesting. Yet the GD went on for nearly a decade. Why? We put people back to work by fiat in various government sponsored programs to build US infrastructure, as well as myriad other things. Yet the GD endured…why? Why did, once we gave all those people jobs, it didn’t start up like a great machine and then run in perpetuity as you are suggesting?
Technically (as defined by GDP), the Great Depression did end “right after” (w/in 3 years) of the New Deal’s beginning. By 1936, the US had established a new record high GDP, which continued to rise until FDR agreed to slash the budget in 1937.
[http://www.ourfuture.org/blog-entry/2009020603/fdr-failed-myth](http://www.ourfuture.org/blog-entry/2009020603/fdr-failed-myth)
Unemployment also improved dramatically - dropping by 15% (or by 10%), depending upon the method of counting unemployment you want to use. However, by 1937 it still remained high (around 22% or 15%, again depending upon how you want to count it). Unemployment wasn’t fully resolved until we entered WWII.
The point is, however, that the New Deal was extremely effective.
---
### Author:  [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)
#### Post date: [June 26, 2012, 1:24pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/45 "2012-06-26T13:24:10Z")
> [@Ruminator](#):
>
> More like idiocy – or to be more charitable, a well-intentioned-but-fundamentally-misguided idea that the movement (aka “velocity”) of money is what sustains an economy.
No, he didn’t say that.
The movement of money certainly can jumpstart a sluggish economy. Only labor sustains it. But sometimes you need to start with moving money to get the labor back into play. Keynes’ theory was how to get an economy going again, as a temporary measure. Anyone who thinks he expected stimulus spending to be permanent completely misunderstands him.
> [@](#):
>
> Because Keynes and P Krugman work around government bureaucrats, it’s no surprise they think this way. Expand/invent government works projects, inject a trillion dollars of “quantitative easing” into the economy, etc. That’s their mental toolset.
Yeah, so? That’s not an argument that they’re wrong, just an observation.
Sometimes the government is the only actor with the means to act in the public interest. That was what Keynes said.
> [@](#):
>
> I’m certain that a future revision of economics that’s based on thermodynamics, game theory, or a hybrid will finally knock down Keynesian and neo-Keynesian economics as the great red-herring of the 20th century.
Keynes works pretty well, except when politics gets in the way.
---
### Author:  [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)
#### Post date: [June 26, 2012, 1:26pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/46 "2012-06-26T13:26:12Z")
> [@Ruminator](#):
>
> More like idiocy – or to be more charitable, a well-intentioned-but-fundamentally-misguided idea that the movement (aka “velocity”) of money is what sustains an economy. Because Keynes and P Krugman work around government bureaucrats, it’s no surprise they think this way. Expand/invent government works projects, inject a trillion dollars of “quantitative easing” into the economy, etc. That’s their mental toolset.
>
> I’m certain that a future revision of economics that’s based on thermodynamics, game theory, or a hybrid will finally knock down Keynesian and neo-Keynesian economics as the great red-herring of the 20th century.
That will be difficult, since predictions based on Keynes have been proven without a doubt correct over the past five years, whereas those based on other models have been absolutely incorrect and have led to failed recovery and unnecessary suffering.
The idea that Krugman works around government bureaucrats is also laughable. If he did, they are certainly not listening to him, and he has made no secret of his dismay at the degree to which people of power and influence have been deaf to established economic principles and sound predictions.
---
### Author:  [@Ruminator](https://boards.straightdope.com/u/Ruminator)
#### Post date: [June 26, 2012, 1:51pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/47 "2012-06-26T13:51:24Z")
> [@Hentor\_the\_Barbarian](#):
>
> That will be difficult, since predictions based on Keynes have been proven without a doubt correct over the past five years, whereas those based on other models have been absolutely incorrect and have led to failed recovery and unnecessary suffering.
Nonsense. The only certain endpoint for Keynesian policy is large scale financial ruin. Why? Because practitioners delude themselves into thinking that borrowing today to "stimulate’ an economy will be repaid (or offset) by massive productivity gains tomorrow. That has a chance of working if USA was self-sufficient in energy resources (oil), and the leading economic power while Europe lays in ruins after WW2. With today’s competition from China, India, etc and dependency on Middle East for oil, this borrow-now-for-prosperity-later will not work. It will devalue the currency and raise interest rates to sky high levels. At that point, the Keynesians will be left inventing YET ANOTHER intellectual reason why their stimulus didn’t work (which will be relabed as post-post-neo-neo-Keynesian.) “The reason $1 trillion stimulus didn’t work was because we should have injected $10 trillion! Oh, $10 trillion failed because $100 trillion was what was really required, and so on.” Their mindset is rooted around the manipulation of money … “velocity”, “liquidity trap”, yada yada yada.
> [@](#):
>
> The idea that Krugman works around government bureaucrats is also laughable. If he did, they are certainly not listening to him, and he has made no secret of his dismay at the degree to which people of power and influence have been deaf to established economic principles and sound predictions.
See Paul Krugman’s name here: [Council of Economic Advisers - Wikipedia](http://en.wikipedia.org/wiki/Council_of_Economic_Advisers)
Yes, he’s an academic but he has deep social networks into the government circles. Perhaps you consider President Ronald Reagan as not part of the government? 😃
> [@lance\_strongarm](#):
>
> Sometimes the government is the only actor with the means to act in the public interest. That was what Keynes said.
I won’t dismiss the idea that government may be the only actor to help the economy. However, the manipulation of money by bureaucrats to make it happen will eventually be exposed as the Grand Delusion of the 20th century.
Government my be the right institution but it’s the wrong tool.
---
### Author:  [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)
#### Post date: [June 26, 2012, 1:54pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/48 "2012-06-26T13:54:35Z")
> [@Ruminator](#):
>
> Nonsense. The only certain endpoint for Keynesian policy is large scale financial ruin. Why? Because practitioners delude themselves into thinking that borrowing today to "stimulate’ an economy will be repaid (or offset) by massive productivity gains tomorrow.
Oh, that’s a delusion alright, but a political one, not an economic one.
We could easily pay off those debts with productivity gains, if we were responsible enough to. But instead, certain politicians choose to either increase government spending or cut taxes or both rather than paying off debt. We briefly had small surpluses in the Clinton years, the last time we managed to be responsible, but that was quickly squandered.
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### Author:  [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)
#### Post date: [June 26, 2012, 1:55pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/49 "2012-06-26T13:55:37Z")
> [@Ruminator](#):
>
> I won’t dismiss the idea that government may be the only actor to help the economy. However, the manipulation of money by bureaucrats to make it happen will eventually be exposed as the Grand Delusion of the 20th century.
>
> Government my be the right institution but it’s the wrong tool.
Please give more details on what you mean.
---
### Author:  [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)
#### Post date: [June 26, 2012, 1:56pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/50 "2012-06-26T13:56:44Z")
> [@Ruminator](#):
>
> Yes, he’s an academic but he has deep social networks into the government circles. Perhaps you consider President Ronald Reagan as not part of the government? 😃
Well, that’s the thing. Reagan was certainly part of the government, but would you call him pro-government because of it?
---
### Author:  [@John\_Mace](https://boards.straightdope.com/u/John_Mace)
#### Post date: [June 26, 2012, 1:59pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/51 "2012-06-26T13:59:59Z")
Since no one else has said it yet: Enormously Wasteful Enterprises: band name!
---
### Author:  [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)
#### Post date: [June 26, 2012, 2:03pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/52 "2012-06-26T14:03:12Z")
> [@John\_Mace](#):
>
> Since no one else has said it yet: Enormously Wasteful Enterprises: band name!
Sounds like an uptight centrist/libertarian’s idea of a good band name.
😃
---
### Author:  [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)
#### Post date: [June 26, 2012, 2:11pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/53 "2012-06-26T14:11:24Z")
> [@Ruminator](#):
>
> Nonsense. The only certain endpoint for Keynesian policy is large scale financial ruin. Why? Because practitioners delude themselves into thinking that borrowing today to "stimulate’ an economy will be repaid (or offset) by massive productivity gains tomorrow. That has a chance of working if USA was self-sufficient in energy resources (oil), and the leading economic power while Europe lays in ruins after WW2. With today’s competition from China, India, etc and dependency on Middle East for oil, this borrow-now-for-prosperity-later will not work. It will devalue the currency and raise interest rates to sky high levels. At that point, the Keynesians will be left inventing YET ANOTHER intellectual reason why their stimulus didn’t work (which will be relabed as post-post-neo-neo-Keynesian.) “The reason $1 trillion stimulus didn’t work was because we should have injected $10 trillion! Oh, $10 trillion failed because $100 trillion was what was really required, and so on.” Their mindset is rooted around the manipulation of money … “velocity”, “liquidity trap”, yada yada yada.
This all bears no resemblance whatsoever to anything that has ever happened in reality. It sounds fevered and scary! Whoever told you all that was lying to you.
---
### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [June 26, 2012, 2:23pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/54 "2012-06-26T14:23:21Z")
[QUOTE=Hentor the Barbarian]
I’ve found a source with some data, and this suggests that recovery did not at all take “years or decades” to recover. In fact, the period from 1945 to 1973 appears to be a period of dramatic, remarkable economic growth in Western Europe, quite in opposition to your characterization.
[http://econ161.berkeley.edu/econ\_art...marshall2.html](http://econ161.berkeley.edu/econ_art...marshall2.html)
[/QUOTE]
Maybe I’m misunderhearing you…I’ve only skimmed your cite while I’m traveling around this morning…but looking at the charts under “II. The Post-WWII Western European Miracle” I see that Germany didn’t get back on track until just about 1960 (that would be 15 years…i.e. ‘years’ plus a ‘decade’), same with France and Britain. Looks like, interestingly enough, that Italy was actually ahead of the curve…though the chart isn’t exactly precise it looks to me like they were back on track by the mid 50’s. That jibes with my own anecdotal memories (I was pretty young in the 60’s). From memory the various Asian countries had similar timelines of recovery (IIRC, the 60’s is when Japan really got back on track and started to be really competitive).
And this recovery IS remarkable. Think about it…they went from a totally devastating war to being back to where they were prior to the war in less than 20 years. That’s pretty remarkable.
-XT
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### Author:  [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)
#### Post date: [June 26, 2012, 2:28pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/55 "2012-06-26T14:28:19Z")
Let’s get back to the heart of this, XT.
> [@XT](#):
>
> Um, no…eventually they will just go back to being half employed and eating less fish, unless they have expanded their markets in some way. You can’t just borrow a ton of money, use it to employ people and then expect those people to pay off the debt AND perpetuate their fish eating habits.
Sure you can.
If unemployed people become employed, they spend more. If they spend more, other get more money for their efforts. Those people in turn spend more, including on the product the formerly unemployed are producing. The system is now self-sustaining.
As for paying off debt - now you have more people working and therefore paying taxes, so tax revenue goes up. Use it to pay off the debt. Don’t squander it by electing politicians who will cut taxes instead.
---
### Author:  [@New\_Deal\_Democrat](https://boards.straightdope.com/u/New_Deal_Democrat)
#### Post date: [June 26, 2012, 2:30pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/56 "2012-06-26T14:30:13Z")
Republicans like to say that the New Deal did not end the Great Depression; World War II did. The reason they say this is because they dislike domestic spending programs, but like military spending.
Nevertheless, military spending is government spending. What is more, it requires real money. Cutting taxes while raising defense spending is fiscally irresponsible.
From the election of Franklin Roosevelt in 1932 to 1940 unemployment declined from 23.6 percent to 14.6 percent. That can be credited to the domestic spending increases that happened because of New Deal programs. From 1940 to 1944 unemployment declined further to 1.2 percent. That was because of increases in military spending, but if the Second World War had not happened, and if the increases in government spending had been for infrastructure projects, and increases in the public sector of the economy the benefits to the general standard of living would have been greater.
> **[United States Unemployment Rate](https://www.infoplease.com/business/labor/united-states-unemployment-rate)**
>
> Find information and statistics about the overall unemployment rate in the United States from 1920 to 2013.
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### Author:  [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)
#### Post date: [June 26, 2012, 2:36pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/57 "2012-06-26T14:36:27Z")
> [@New\_Deal\_Democrat](#):
>
> Republicans like to say that the New Deal did not end the Great Depression; World War II did. The reason they say this is because they dislike domestic spending programs, but like military spending.
>
> Nevertheless, military spending is government spending. What is more, it requires real money. Cutting taxes while raising defense spending is fiscally irresponsible.
>
> From the election of Franklin Roosevelt in 1932 to 1940 unemployment declined from 23.6 percent to 14.6 percent. That can be credited to the domestic spending increases that happened because of New Deal programs. From 1940 to 1944 unemployment declined further to 1.2 percent. That was because of increases in military spending, but if the Second World War had not happened, and if the increases in government spending had been for infrastructure projects, and increases in the public sector of the economy the benefits to the general standard of living would have been greater.
>
> [http://www.infoplease.com/ipa/A0104719.html](http://www.infoplease.com/ipa/A0104719.html)
Not interested in any discussion with you, even if I agree with you about this.
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### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [June 26, 2012, 2:36pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/58 "2012-06-26T14:36:59Z")
[QUOTE=lance strongarm]
Sure you can.
[/QUOTE]
Obviously I disagree…mainly with your assertion of an absolute. If you want to modify it to ‘maybe you could’ then I’ll be happy to concede that it’s possible, though not a probable outcome, depending on a bunch of details missing from your original analogy. But to say that it’s always going to be the case? Um, no…I disagree.
> [@](#):
>
> If unemployed people become employed, they spend more. If they spend more, other get more money for their efforts. Those people in turn spend more, including on the product the formerly unemployed are producing. The system is now self-sustaining.
It might work out that way, but it’s not a given. Or, to put it a different way, what evidence do you have that this has happened historically? That borrowing a lot of money simply to put a bunch of people who were out of work back to work and without expanding markets in any other way has made any economic system ‘self-sustaining’. I can’t think of a single historical example where this was the case without some external expansion, but if you can then I’ll consider it seriously.
-XT
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### Author:  [@John\_Mace](https://boards.straightdope.com/u/John_Mace)
#### Post date: [June 26, 2012, 2:37pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/59 "2012-06-26T14:37:12Z")
> [@Hentor\_the\_Barbarian](#):
>
> Sounds like an uptight centrist/libertarian’s idea of a good band name.
>
> 😃
I’m not a centrist/libertarian. 😉
---
### Author:  [@XT](https://boards.straightdope.com/u/XT)
#### Post date: [June 26, 2012, 2:39pm UTC](https://boards.straightdope.com/t/how-can-enormously-wasteful-enterprises-be-good-for-an-economy/626281/60 "2012-06-26T14:39:29Z")
[QUOTE=John Mace]
I’m not a centrist/libertarian.
[/QUOTE]
I’m probably closer to that than John here is, and my thought on John’s band name would be ‘he shouldn’t give up the day job’…
😛
-XT
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