Of course, regular old lags at this site will know of my propensity for wholesale larceny whenever I spot anything worthwhile on another site which I do frequently because, dammit, so many people think and write better than me. Here I have a brilliant blog post from the proprieter of The Cafe Hayek which I will not attempt to paraphrase. However, to appreciate it in full it is necessary for you to read, in the post immediately below, my synopsis of a previous post at The Cafe Hayek by Mr. Russ Roberts in which, with delightful malice aforethought, he deflates that great windbag Paul Krugman by quoting, er, Paul Krugman. Having read that, then read this by Donald Boudreaux:
Suppose that famous scholar Jones had acknowledged in a best-selling textbook or in a highly regarded academic article the rather obvious point that an increase in the frequency of successful thievery reduces economic growth. Increased thievery reduces economic growth in three ways. First, property rights will be less secure, thus dampening productive people’s willingness to build machines, to accumulate inventories, and, generally, to create moveable property; second, as relatively more people choose to work as predators, relatively fewer choose to work as producers; third, more resources are used simply to protect existing property from being stolen rather than used to produce and improve productive capital.
Suppose that later, on a popular website whose audience is known generally to applaud armed robbery and other modes of theft (they think theft to be a splendid means of promoting ‘social justice’), Jones explains that it is a silly and ideologically driven tic to dismiss the possibility that increased thievery will promote economic growth. If thieves have a higher marginal propensity to consume than do their victims, then the increased spending by the thieves – whose incomes rise because they are now stealing more every year – might well stimulate the economy onto a path of higher growth. Also contributing to greater economic growth are victims’ higher expenditures on the likes of padlocks, alarm systems, and armed guards.
While it’s imaginable that the economy will respond to increased thievery in the happy way that Jones describes in his popular essay, no person of sense would take Jones seriously. No one would say, “You know, Jones has a point. Let’s not be so narrow-minded in our pursuit of economic truth. Let’s be scientific and consider all possibilities. Jones outlined a general-equilibrium theory that explains the benefits of increased thievery. Therefore, because Jones is a famous scholar, his case for thievery must be taken seriously and not dismissed simply because elsewhere he points out the partial-equilibrium downsides of theft. Jones is looking at the whole picture. Perhaps more thievery would indeed be wonderful for the economy.”
Yet when taking more of Sally’s property and transferring it to Steve is done by government and labeled “tax” and “unemployment benefits,” Jones’s general-equilibrium analysis suddenly becomes respectable. Those who object to it are accused of being benighted by ideology and of suffering from an unscientific inability to appreciate Jones’s brilliance in pointing out the nuances of general-equilibrium versus partial-equilibrium theorizing.
One can still make a case on humanitarian grounds (or on grounds imagined to be humanitarian) for forcibly transferring resources from employed Sally to unemployed Steve. But to then attempt to explain that this policy might actually increase Steve’s likelihood of finding and taking a job is an unreasonable – a scientifically unreasonable – stretch. Yes, the Keynesian effect is imaginable (human imagination is expansive, and the range of the possible is vast), but how likely in reality is the ‘general-equilibrium’ effect to dominate over the ‘partial-equilibirum’ effects? In the case of an increase in outright thievery such as pickpocketing, burglary, and armed robbery, arguing for a serious consideration of the reality of the ‘general-equilibrium’ effect of a stronger economy would be seen for the tiresome pedantry that it is. In the case of government-orchestrated unemployment ‘insurance,’ though, such pedantry suddenly, and mysteriously, becomes the mark of a serious scientist.
So, those who believe that this positive economic effect of higher unemployment benefits is sufficiently likely in reality to warrant serious consideration (and to justify Krugman’s sneering dismissal of those who think otherwise) are also scientifically compelled to list thievery as a potential economic stimulant. Note that I do not say that they are obliged to champion thievery. A variety of other considerations might still lead them to reject thievery as a sound economic policy. When discussing the scientific merits of a policy of encouraging people to pursue careers as pickpockets, embezzlers, burglars, muggers, and armed robbers, however, the general-equilibrium effects of such a policy must be recognized as possibly promoting stronger economic growth. Or so Keynesians must reason.
Simply too, too, delicious!
NOTE: In my title I placed inverted commas round 'Keynesians' because whilst I am no expert on the man I gain the impression that he changed his mind considerably as he grew older. So being a 'Keynesian' covers a multitude of sins as well as virtues!