Out-of-touch Keynesians still think ‘digging ditches’ is a good idea

By David McElroy · August 19, 2011

The good news for unemployed people is that Barack Obama is about to do his best imitation of Bill “I Feel Your Pain” Clinton and start concentrating on giving them jobs. How? Well, that’s not so clear. They’re making it up as they go along. The bad news is that the mainstream economists who the administration listens to are just as confused as they are about how to “create jobs.”

The Obama administration said Wednesday that the president will make a speech shortly after Labor Day outlining what he’s planning to do about creating jobs. It would probably help if he would call someone at the Mises Institute for a few minutes to get an explanation about why government can only destroy jobs, not create them. Since that’s not going to happen, let’s take a look at the beliefs of the sort of neo-Keynesians who he will be listening to in formulating his plan.

In an exchange on the CNN show “Fareed Zakaria GPS,” there’s the following exchange between an economist and the host:

Kenneth Rofoff, economics professor, Harvard University: Infrastructure spending, if it were well-spent, that’s great. I’m all for that. I’d borrow for that, assuming we’re not paying Boston Big Dig kind of prices for the infrastructure.

Fareed Zakaria, host: But even if you were, 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’d pay taxes, so maybe Boston’s Big Dig was just fine after all. [Emphasis mine]

This is one of the key roots of the problem with many mainstream economists. They believe the economy is about money. In reality, it’s about value produced. If they were stupid enough to believe what they were saying, all they would have to do is send everyone in the country a check for a million dollars. Print the money. We’d all be rich.

But that’s not the way things work. Creating money to pay for unproductive work just inflates prices, stealing from those who are still productive. Taxing people to pay for unproductive work takes investment and spending money out of the economy, reducing the ability of the market even further to create jobs. Creating useless work — whether through printing money or taxation — destroys jobs in the private sector. It’s obvious to anyone who’s not looking at wall pin-ups of John Maynard Kenyes with goo-goo eyes.

After no one challenges Zakaria’s bizarro assertion that Boston’s Big Dig was just swell even though it cost ridiculous amounts of money for the value produced, my favorite economist from the Twilight Zone jumps in to pull out another favorite myth of the Keynesians and their friends.

Paul Krugman, New York Times: Think about World War II, right? That was actually negative social product spending, and yet it brought us out.

I mean, probably because you want to put these things together, if we 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 is, in fact, what fhe 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, if you think about using all of these things together, you could accomplish, you know, a great deal.

If we discovered that, you know, 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, oops, we made a mistake, there aren’t any aliens, we’d be better –

Rogoff: And we need Orson Welles, is what you’re saying.

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, we need it in order to get some fiscal stimulus.

These people honestly believe that money spent — no matter why it’s spent or the effects of the spending — is the same as creating growth. They don’t understand that if the spending produces nothing of value, the amount of overall value in the economy is lowered and that the average standard of living must go down.

(If you’d like more details about why World War II didn’t end the Depression, as Krugman asserts, take a look at this explanation by Art Carden at the Mises website. For other “Great Myths of the Great Depression,” see this excellent article from the Mackinac Center for Public Policy.)

Jobs and wealth are created when people use their minds to figure out things they can do that other people want to exchange things of value for. When you create something of value and another person creates something of value — and you exchange those things of mutually beneficial terms — you both benefit. But if you and your trading partner both just dig ditches and fill them — and then exchange those ditches — you each have nothing to show for your efforts.

The only way someone can end up with something of value for having done something useless is if he is given value that has been taken away from someone else. That’s what the Keynesians advocate. They honestly don’t understand that digging ditches for each other doesn’t create wealth, even if we write people checks and tell them they’re good citizens.

The economy is about value, not about money. Money just represents the value of productive work. If you take away the productive work that people voluntarily do for one another, you’re left with nothing but bits of paper and numbers in computers.

Government “make work” programs don’t work. They never have. They never will. The state destroys wealth — and it’s time for it to get out of the way for productive people to live as they please.

Note: If you want to be entertained and educated about the debate between free market Austrian-school economists and state control advocates of the Keynesian camp, I highly recommend two rap videos. (No, I don’t normally like rap.) “Fear the Boom and Bust” came out early in 2010 and was a big hit, especially with free market types. The sequel this year, “Fight of the Century: Keynes vs. Hayek Round Two,” is just as good. I especially enjoy the short bit in the opening of the second one featuring the always-entertaining economist Mike Munger as a security guard. Take a look at them.

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If you have problems with high blood pressure, I’d like to encourage you to consider making serious changes to your diet. There might be some people who don’t have any choice but to start taking prescription medications for high blood pressure, but I’d like to tell you that I have completely eliminated my issue by eliminating all sugar and almost all carbohydrates. (A couple of months ago, my blood pressure hit 185/144, which was dangerously high — considered stage 3 hypertension.) By completely changing my eating habits, I’m down 22 pounds and my blood pressure is now in the “ideal” range — without taking any medication. In addition, I sleep better and I have more energy. Getting away from the sugar-laden mess that we generally refer to as “highly processed food” has been a life-changer for me. Now my challenge is to avoid slipping back into old habits — by eating in the dangerous ways that almost everyone in our society has come to see as normal.

When I first heard about this, I thought it must be satire. When I discovered it was real, I was appalled, but I still thought it must be a one-time thing from some nutty activist. But it turns out it’s the latest bit of pandering to a bunch of far-left activists who believe that a man can become a woman if he decides to claim he’s a woman. As everybody knows, men have prostate glands. Women do not. Period. End of story. Men can get prostate cancer. Women cannot. But political activists are so eager to pretend that a man claiming to be a “trans woman” is really a woman that they are insisting that “women” be included in public health messages about the issue. This is nothing but political virtue-signaling. If you’re a man, you know which parts you have. You know that you ought to be screened. Nobody is made any safer by dragging far-left gender ideology into simple medical reality.

Every time someone tries to tighten requirements around the use of absentee ballots, I hear screams from Democrats and others on the political left that such efforts are nothing but “suppression of black voters.” These protests have never made sense to me, especially because it’s never been a secret that absentee ballot fraud goes on all the time in certain areas. (Everybody knew it when I worked in politics.) The people who engage in such fraud are rarely caught — often because the local political establishment approves of the crime — but a Democrat who won a primary election in Clay County, Alabama, last year has pleaded guilty to this sort of cheating. Terry Andrew Heflin was running for a place on the Clay County Commission. He was caught ordering seven absentee ballots in the names of various voters and sending them to his post office box — after which he used the ballots to vote absentee for himself seven time. Did he have other people cast additional fraudulent ballots? We’ll never know. But in a primary in which he was able to win with only 141 votes, it wouldn’t take many fraudulent votes to change the election. The next time you hear “civil rights activists” claim that it’s just “voter suppression” to hurt blacks which is at the root of efforts to stop this fraud, remember Terry Heflin. If you care about fair and honest elections, ballot security and voter identity should matter to you.

A state legislator in Maine has been stripped of the ability to speak in the state Legislature — and her votes are not being counted on legislative issues — all because she made a truthful social media post. Rep. Laurel Libby (R-Auburn, Maine) opposes allowing boys to compete against girls’ teams in school athletics and she’s become known for making an issue of it. On Feb. 17, she posted on Facebook about a recent example that she found outrageous. She posted side-by-side photos of a boy named John who competed last year in a state track event and won fifth place against other boys two years ago — and a photo of the same boy (now called Katie) who won first place in the same event this year against girls. Whether you find this outrageous or not, Libby is clearly being honest and truthful about the objective facts of an issue of public importance. But the state Legislature censured her. Democrats decreed that she could not speak in the House and that her votes would not count on legislation — until she apologized for the outrage of telling the truth. She refused and her constituents have been unrepresented in the state House since then. The people who promote this ideology are out of touch with reality and won’t rest until they force the rest of us to join them in this delusion. But even if you agree with “trans” ideology, you should be appalled at this heavy-handed attack on political speech.

The late Steve Jobs was at the center of our culture’s transition from analog to digital. He co-founded Apple Computer. He led the team that revolutionized personal computing with the first Macintosh. As CEO of Apple, he led the development of the iPhone and later the iPad. You would think the children of such a man would be surrounded by technology. But Jobs and his wife Laureen didn’t let their children use iPads. Their home had few screens of any kind. Even though Jobs spent most of his time developing and selling Macs and iPhones and iPads, he was home with his wife and children for dinner when he was in town. The family ate together at a simple wooden table in their kitchen — and there were no digital devices or focus on popular culture. Instead, he’s said to have guided his family toward deep discussions of art, philosophy and education — with no iPads to be found. If the man who guided the development of such products chose a different path for his own children, does that suggest that his digital experience taught him that children need human connection, not screens? And does it suggest the possibility that we might be better off if we made the same choice for our families?

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