Incompletely developed thoughts, loosely connected:
- It’s not spending. It’s buying. The government is not spending our money when it builds roads and subsidizes the employment of teachers and health care workers; it’s buying us better roads, better schools, better hospitals.
- Economics is not an empirical science. It’s reasoned guessing. That’s why there’s no Standard Theory in economics, like there is in Biology and Physics.
- What’s happened in the past 30 years is new, radically new. The development of information technology, and the use of that technology to control machines, requires that we think differently about cost, price, and profit: no theories developed before about 1975 can deal with the dramatic drop in manufacturing and service delivery costs that have happened since then.
- Steady or gently rising prices, plus plummeting costs, have created enormous profits, inflating investor wealth and expectations way beyond what was reasonable before 1975.
- The general idea that we have been pretty much immune to inflation in recent times is an illusion. Falling costs (which involve stagnant or falling wages and fewer jobs) have very much the same effect as classical inflation.
- By the same token, deflation, when the disparity between price and cost has gotten so out of line, is not the horrendous event that classical economic theory imagines the word to describe.
- When costs drop, innovative effort requires less capital investment; the big losers in a deflationary economy are the capitalists. Fuck ‘em.
- The cost to government of stimulating innovation and increased production of commodities (including commodity services like education and health care) is not great in an economy in which costs are dropping dramatically and steadily. Government is in a better position to measure its return on stimulus investment in terms appropriate to the well-being of the society and is not (or should not be) concerned, as a private investor must be, about maximizing the monetary return on its investment.
- There are a lot of people used to working who have lost their jobs. Deflation doesn’t help them much; if there’s no money coming in, it doesn’t really matter much how low prices fall. Those people need jobs, which intelligent government stimulus will generate, and, until those jobs materialize, they need help getting by.
- I don’t need direct help, at least right now. I don’t need tax cuts or checks in the mail; deflation will take care of me in that regard. I want the government to buy me stuff that it’s unrealistic to expect private capitalism to buy me, and to create jobs in the process, so that civic order and individual pride and responsibility can be maintained.
How much sense is there in all this?