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Friday, June 20, 2014

New York Times Says "Lack Of Major Wars May Be Hurting Economic Growth"

            


What is sadder for economists, even formerly respectable ones, is that overnight it was none other than Tyler Cowen who, writing in the New York Times, came up with yet another theory to explain the "continuing slowness of economic growth in high-income economies." In his own words: "An additional explanation of slow growth is now receiving attention, however. It is the persistence and expectation of peace."
That's right - blame it on the lack of war!
The world just hasn’t had that much warfare lately, at least not by historical standards. Some of the recent headlines about Iraq or South Sudan make our world sound like a very bloody place, but today’s casualties pale in light of the tens of millions of people killed in the two world wars in the first half of the 20th century. Even the Vietnam War had many more deaths than any recent war involving an affluent country.
Well, that's just unacceptable: surely all the world needs for some serious growth is for war casualties to be in the billions, not in the paltry hundreds of thousands.

Keynesianism 101 continues:
Counterintuitive though it may sound, the greater peacefulness of the world may make the attainment of higher rates of economic growth less urgent and thus less likely. This view does not claim that fighting wars improves economies, as of course the actual conflict brings death and destruction. The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work. Rather, the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation’s longer-run prospects.
To be sure, Cowen is quick covers his ass with some quick diplomacy. After all how dare he implicitly suggest that the only reason the US escaped the Great Depression is what some say was its orchestrated entry into World War 2:

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