Paul Krugman: “Space Aliens Could Save U.S. Economy”
By Mary Theroux | Monday August 15, 2011 at 3:19 PM PDT
As Dave Barry used to say, I’m not making this up.
Deeply mired in the fatally flawed myth that World War II ended the Great Depression, Nobel Laureate Paul Krugman yesterday proposed that an invasion by space aliens would well provide the economic stimulus this country needs:
As Dr. Robert Higgs has more than ably shown, the Great Depression continued, and deepened, throughout the New Deal and throughout World War II. The World War II years were a time of shared privation, with virtually every item that we take for granted today either rationed: e.g., meat, gasoline, sugar, clothing; or not available at any cost: e.g., new cars, appliances, etc. The American standard of living throughout World War II remained at an excruciatingly low level that no 21st century American would accept. Meanwhile, unemployment disappeared simply because 16 million able-bodied people were sent to war, paid below-market rates and subject to danger, death, and maiming they may not have preferred to unemployment.
As I earlier detailed in “One More Time: World War II Did Not Bring Us Out of the Depression,” the Great Depression ended in 1946, when 10 million individuals were returned to the ranks of the unemployed, and federal spending plunged 40% in the aftermath of FDR’s death and the abandonment of the New Deal.
If Dr. Krugman would quit reading Keynesian theory and start reading history, he could earn his Nobel and look for salvation not from aliens but from the creative engine fueled by free individuals unencumbered by regime uncertainty and widespread diversion of productive resources to government programs.
HT: David Shellenberger
Tags: American History, Austrian School of economics, Bailouts, Budget and Tax Policy, Economics, Free Market, Government subsidies, Great Depression, Regulation, Taxation, Unemployment, War, Welfare 
there is something Keynesian’s simply do not understand. every dollar that the government spends is a dollar that would have been spent by someone else. The ENTIRE Keynesian hypothesis is based on the assumption that saving is really hoarding, stuffing money in your mattress.AND even if that was true, the government should not intervene to stop this stuffing because the short term gains would NOT be worth the long term lasses once that money was taken out of the mattresses.
frank h | Aug 16, 2011 | Reply
In an era of peak natural resources, wasting resources fighting space aliens would just result in inadequate oil et al being available for important activity (like feeding people). It would be the privation citizens experienced during WWII on steroids.
Already the budget does not balance because far too many resources have been wasted building metaphorical Keynesian pyramids. An example would be the millions of empty McMansions that dot the countryside, which were built in response to wanton bank printing to stimulate the economy. No one will pay for the empty McMansions, so the taxpayers are asked to endlessly bail out the banks. Normal activity is shortchanged.
The price for Keynesian “stimulation” in the era of peak natural resources is a lower standard of living.
Mike | Aug 17, 2011 | Reply
I wonder if the good professor watched any of Falling Skies. A sufficiently powerful alien invasion would render the stimulus moot pretty quickly.
Stephen Karlson | Aug 17, 2011 | Reply
Mike,
We are not “peaking” in any way With regards to any resources.
That is simply another Malthusian myth.
Check out “the ultimate resource” by Julian Simon.
Redmond | Aug 18, 2011 | Reply
“there is something Keynesian’s simply do not understand. every dollar that the government spends is a dollar that would have been spent by someone else.”
This is refered to as crowding out and if you actually read Krugman you would know he is well aware. He has pointed out that at this time and similarly in Japan in the past, central banks have increased the money supply to disappointing effect. The private sector has lots of money availible at low interest. There is not crowding out and will not be... even if the government borrows and spend significant money to employ people to improve infrastucture (which need repair and improvemet).
You assume that Krugman is stupid because he does not agree with your mindset and refuse to read him. Then you mindlessly criticize.
Dean Weichmann | Aug 20, 2011 | Reply
Horribly dumb economics! Government jobs are a Ponzi scheme. Pay someone to work so they can pay taxes?
Anthony Lima | Aug 20, 2011 | Reply
As a Keynsian, I am delighted with the moronic response from the political right to Krugman’s “alien” point. Krugman here is simply making the same point that Keynes made namely that you can get an increase in GDP and employment even if the form of spending that brings that increase is pointless. Keynes gave as an example having people dig holes in the ground and fill them up all day long.
Having given that example, Keynes then explained at length (for the benefit of the stupid and the humorless) that he was not seriously in favour of piontless hole digging. That is, he was simply giving a colourful illustration of a technical point.
Krugman’s big mistake when spelling out his alien point was that he didn’t explain (for the benefit of the stupid and the humourless) that he was not being serious.
In fact the two Ks would have been better off not using colourful or humorous illustrations. If your audience is so dumb that after telling them a joke you have to explain that you’ve just told a joke, there is not much point in telling the joke.
Ralph Musgrave | Sep 14, 2011 | Reply
Ralph:
Unfortunately, the tragic results of the government’s implementing Keynesian policies that prolong economic malaise is no joke to the millions who remain unemployed and without economic opportunity. Please spend some more time on the Beacon to learn a bit more about the failure of Keynesian theory in our real world. Robert Higgs has provided prodigious amounts of data that show that government spending does not and never has produced an increase in real GDP or what could be termed “employment.” Yes, World War II transferred 10 million of the unemployed to the theater of war, but would you characterize being drafted, put at severe risk of maiming and death, and being paid a non-living wage as being “employed”?
A few straightforward posts and articles for your enlightenment: “One More Time: Consumption Spending HAS Already Recovered“; Government Stimulus: Polishing the Rotten Apples; and more. For a look at the failure of Keynesian theory in the Great Depression and World War II, most recently Amity Shlaes cited Dr. Higgs’s work in this piece in yesterday’s Wall Street Journal: An Economy In Trouble: Notwithstanding the billions of dollars spent, the economy did not get back to its 1929 level in FDR’s first two terms. Also: One More Time: World War II Did Not Bring Us Out of the Depression, which includes links to many of Dr. Higgs’s seminal works.
Happy reading!
Best wishes,
Mary
Mary Theroux | Sep 14, 2011 | Reply