— PBS NewsHour (@NewsHour) November 10, 2015
This is the recycled Keynesianism that gets passed off in public discourse that is little more than a glorified version of the broken window fallacy. How can we seriously be six years into zero interest rate policy, three attempts of quantitative easing, and numerous stimulus packages and still think that what we are suffering from is a “shortfall in demand”. The answer seriously proposed in the above article is that we need people to take more vacations (that is to produce less) and to consume more, regardless of the fact consumers are already at peak debt, that people are not saving, and the service sector is one of the only sectors (besides healthcare) that is growing. The article even claims that mandated longer paid vacations will reduce income inequality! We are eating away at the capital build-up limp we are seating on with these asinine policies and ideas. Please don’t confuse what I’m saying for the supply side economics of Art Laffer or trickle down economics. I’m simply advocating the common sense notion that production and savings must come before consumption. I’m beginning to come of the conviction that the broken window fallacy is the most fundamental concept of economics and that if someone can come to understand they will be impervious to all modern notions of economic stimulus posited by academic economists. Just as important to understand is the related notion Henry Hazlitt applied with fervor that what is bad for the individual cannot be good for the public who are nothing but a collection of individuals: “But whatever led people to suppose that what was prudence in the conduct of every private family could be folly in that of a great kingdom?” (from Henry Hazlitt’s Economics in One Lesson)
Going on a vacation to Disney World will never be a viable option for a family to make ends meet, and neither will it be for an economy. This is the tattered rags of Keynes’ paradox of thrift. Only as natural resources are turned into economic goods and there is an accumulation of capital greater than the level of consumption in a society can wealth be created. This is a law of nature as much as that two and two make four. Quite literally we can say with the proverbs that these people are fools:
Go to the ant, O sluggard;
consider her ways, and be wise.
Without having any chief,
officer, or ruler,
she prepares her bread in summer
and gathers her food in harvest.
How long will you lie there, O sluggard?
When will you arise from your sleep?
A little sleep, a little slumber,
a little folding of the hands to rest,
and poverty will come upon you like a robber,
and want like an armed man.
(Proverbs 6:6-11 ESV)
or again Wisdom tells his son:
The sluggard does not plow in the autumn;
he will seek at harvest and have nothing.
(Proverbs 20:4 ESV)
As much as I wish Austrian economics was more respect by the academic world theses people are so idiotic that they really believe that U.S. households are suffering from lack of inflation, a strong U.S. dollar, and too little consumption. I hope for the sake of humanity these people are never in charge of anyone’s personal budget. That’s why I’ve always thought Austrian economics and praxeology are quite simple and yet profoundly in harmony with the wisdom of proverbs.
— Per Bylund (@PerBylund) November 15, 2015
So Solomon observes the modern capital structure built of fiat finance, corporate buybacks, zero interest rate policy, and debt-leveraged over consumption:
I passed by the field of a sluggard,
by the vineyard of a man lacking sense,
and behold, it was all overgrown with thorns;
the ground was covered with nettles,
and its stone wall was broken down.
Then I saw and considered it;
I looked and received instruction.
(Proverbs 24:30-32 ESV)
Perhaps the sluggard was in the farmhouse drinking wine with Krugman saying “Just doing my patriotic duty to boost aggregate demand!”