A key fallacy of mainstream economics today is its belief that all economic activity is good activity. Quality doesn’t matter. We must “stimulate” the economy to get those GDP numbers up, and all will be better. It doesn’t matter if we rack up endless debt, only to pay people to dig holes and re-fill them or to re-build cities destroyed in war.

It sounds like I’m exaggerating, doesn’t it? Many economists would scoff that I am. Except I’m not.

For example, Paul Krugman and other neo-Keynesian economists claim often (and wrongly) that the destroy-and-spend of World War II is what pulled the world out of the Great Depression. Krugman has called for housing bubbles and fake alien invasions on more than one occasion, and only half-jokingly at best.

Or we have the recent movement to count illegal activities (drugs and prostitutes) as part of GDP. It got another little boost when Spain signed on. (By counting illegal drugs and prostitution as part of its GDP, Spain can reduce its official debt-to-GDP ratio, making its finances appear sounder than they are.)

I believe that all of this speaks to both the deep Statism and the deep nihilism that have infected modern culture. The implication – that economists never state outright because they know it would sound too crazy, but the implication remains – “Gee, if only the government would spend on destruction, the economy would boom. If only people would buy more meaningless sex and drugs, the financial system would be sound.” As if those are productive activities.

Again, put like that, it sounds like I’m drawing a caricature; but I’m not. A recent example is from the New York Times, a serious opinion pieced titled The Lack of Major Wars May Be Hurting Economic Growth. It begins: [Read more…]