Sunday, December 20, 2009

Growth for the Sake of Growth

Congratulations, Tiger Woods! Not for your numerous extramarital affairs, but for stimulating our nation's economy! You see, your scandal has increased the number of tabloid sales in the United States, which means people are spending more money, which means we're closer to getting out of the recession!

...I hope all of you can see that this is pretty ridiculous. And yet this is the same line of thinking that many economists actually use. Keynesians, like Paul Krugman, seem to think that if we just spend more, we'll be able to get the economy back to health. And while they might not mention tabloid sales as a way to increase consumer spending, buying more junk (ahem, "Chinese-made imports") ought to solve the problem. In fact, if the government paid people to dig holes and then fill them up, this would also be enough to stimulate demand and bring the economy out of a recession.

GDP is not the economy. GDP is simply a number invented by economists to measure the economy. As I've said before, breaking windows will increase GDP, but it doesn't make the economy any stronger. In fact, it makes it weaker. Growth for the sake of growth is misguided and ultimately futile. We should be concentrating not on quantity, but quality. The new service jobs that have replaced outsourced manufacturing jobs pay far less. People have more stuff, but it's all poorly made. Are we actually better off?

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