Tuesday, February 10, 2009

Keynesian Arsonists?

Southern Australia has in recent days been tormented by damaging bushfires that have killed at least 181 people (that number will unfortunately probably grow), which the Al Gore types have of course blamed on global warming (or "climate change"), ignoring the unusually cold temperatures in much of Europe and North America.

Anyway, now we see some economists arguing that the fires may not be such a bad thing after all. While acknowledging the tragic and sometimes lethal effects on some, they argue that the at least the bushfires are good for the economy. Here is a quote from the Australian (Thanks Chris for the tip):

"As an aside, the bushfires may help the nation fend off recession: Goldman Sachs JBWere economist Tim Toohey says rebuilding will generate an economic stimulus equal to 0.25-0.4 per cent of GDP over the next 18 months.

"As tragic as the events of the past two days have been, the rebuilding phase will provide a catalyst for economic growth in coming months, even if the personal and environmental cost takes years to recover," he says."

Many suspect that arsonists may have had a role in the creation of these fires. Maybe these arsonists were Keynesians determined to help Australia fend off recession by burning down these houses! After all, if you really believe , like Keynes did, that it is a good idea to bury bottles in the ground and then digg them up again, why not also believe that it is a good idea to burn down houses and rebuild them?

If only people could learn to read Bastiat instead of Keynes.....


Anonymous Per-Olof Samuelsson said...

Paul Krugman made the same kind of argument after 9/11.

Surprise, surprise...

5:35 PM  
Blogger Bill said...

Prof. Karlsson,
I'll try to get you to understand where Keynes was coming from. Read the last paragraph on page 106 of the General Theory. What does it mean that capital doesn't exist apart from consumption? When you understand that, you will see Keynes idea. Does the captial (I mean real physical capital, not finacial capital, etc.)of a Nation equal the wealth of a Nation?


11:56 PM  
Blogger stefankarlsson said...

Bill, I'm not a professor, but thanks for the tip.

5:14 PM  
Anonymous Per-Olof Samuelsson said...

Since I don't have "General Theory" available, I'm curious to know what Keynes actually says on p. 106 - and especially whether is has anything to do with the present discussion.

6:07 PM  

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