cargo cultists and folk Keynsians
Cargo cults. Cargo cultism. Cargo cultists are said to believe that the “cargo”—or manufactured goods—of the world got thrust into existence by divine fiat and is therefore the common property of all peoples; that that the cargo of the world was expropriated by its selfish owners; that the flow of cargo may be restored to its rightful owners by means of the laws of attraction, laws that are strikingly similar to Oprah endorsed Rhonda Byrne’s so-called Law of Attraction. Put simply, this law is the almost universal folk notion of the doctrine of sympathies, the basis of sympathetic magic, the notion that like produces like. Hence cargo cultists construct air strips and air craft out of bamboo and foliage to attract load-bearing aircraft back to their islands.
Similar to cargo cultists observing the operation of aircraft and at an arial logistical hub, economists and financiers observe the activities of consumers as those consumers seem to drive the economy through their aggregate spending. It is a maxim of folk Keynsianism that to stem deflation—a fall in the price of assets, e.g. homes, durable goods, commodities, equities of various kinds, energy—you need to release stimulus money in the form of Government spending. This stimulus may take the form of super-cheap credit, industry bailouts, direct cash infusions, super-massive infrastructure projects, jobs programs, government purchases of equity or securities, stimulus checks mailed to tax payers—it is a matter of complete indifference to the Keynsian imagination by what instrument of policy you get money into the hands of consumers so that they may again consume. All that matters is that consumers consume again and that money circulates again.
Lots of presumably smart but certainly influential people believe the Keynsian stimulus-response theory, e.g. Canadian Finance Minister Jim Flaherty, Bank of Canada Governor Mark Carney, U.S. Treasury Secretary Paulson, Chair of the U.S. Federal Reserve Bernanke, U.S. President Bush, and the entire incoming Obama administration.
I am hardly in a position to question their wisdom. But doesn’t the Keynsian imagination mistake the map for the terrain? People buying things registers price. It is how a community of buyers and sellers negotiate value or what things are worth. But this process does not create value. To create value you need to do something, grow something, or make something that other people need. Keynes himself famously imagined that to stimulate an economy a government could pay workers to dig holes and then fill them back up. But to dig a hole and fill it back up returns no useful good or service. The worker would presumably consume food, clothing, and shelter, as well as wear down his tools, but nothing would come of it. This would be consumption in its purest form masquerading as genuine economic activity, sort of like a bamboo aircraft. Could this activity bootstrap an economy as the diggers spend their wages on necessities and a few luxuries? Or would this non-activity displace genuine economic activity because it would consume resources and capital that could be more usefully allocated? I think history would predict the latter.
Or am I missing something?
yours &c.
g.
