Another commonly held belief that begs questioning

A consumer-based economy

Coupled very strongly with the idea that a growing economy is always a good thing is the idea that the growth should come from consumption. Consumers, buying stuff, create demand and then jobs. This morning Paul Krugman wrote a column in the New York Times, "When Consumers Capitulate", in which he, like all mainstream economists, believes a recession is always a bad thing and worries that the consumers are cutting back spending at just the wrong time — right when we are diving into a recession. He states:

"The point is that if consumers cut their spending, and nothing else takes the place of that spending, the economy will slide into a recession, reducing everyone’s income."

Emphasis added.

In other words, Dr. Krugman buys the conventional wisdom from the closed-system model of economics. As I have pointed out, not every economist buys that per capita GDP represents or indicates income. Herman Daly, among others, points out the fallacies of using GDP for any meaningful measure of income. As long as values are denominated in dollars, no one can say what the status of income really is! As long as the dollar denominated GDP includes numbers that should be subtracted rather than added (e.g., defense spending) you will never have a clear understanding of what real income is.

Aside from the fact that growth is actually not a good thing — it is killing our world — the fact that it is the thing being touted as showing the health of the economy (and presumably the society) is perverse in the extreme. This is what scares me on this Halloween night! Why don't people examine their own assumptions? Why does everyone just accept something as being self-evident when it isn't evident at all?

In my prior blog I looked at the notion of what jobs really contribute to social good and which ones don't. By that criteria it should be obvious that consuming stuff just for the sake of creating jobs that do not contribute to social good should be seen as an evil not as a good. And, as I have indicated above, it is all predicated on a lie we continue to tell ourselves. GDP does not represent good. It is a phony number that politicians in power juggle around so that it sounds good. I'd sooner believe in ghosts and fairies than government numbers these days.

Personal and national thrift are the virtues (read Krugman's article) that we need to re-establish. Savings are required before you can either insure against future disasters or borrow a bit of for new ventures (honest capitalism). Our grandfathers understood this. How did we forget? Hmm. That is a good question!

Comments

[Old Ari]

"Begs the question", means avoids the question.

[Dbarker06]

"begs the question" means that there is an obvious question. When the question is not answered, that's when it also means "avoids the obvious question".

[Dbarker06]

I think that this is the first blog that I have ever seen that seriously addresses the question that I have been asking for some time, "Why is growth the only measure of good? If we could all just learn to be happier with less stuff, couldn't the economy contract and we'd all still be better off? Is the rate of economic growth even known to be correlated with average personal happiness--whatever that is.

[George Mobus]

There are probably a huge number of questions we should be asking about the conventional wisdom of growth and consumption as the basis for a healthy economy. My real question is about human nature and how we manage to forget lessons we have learned over and over again - like saving and not borrowing from the future. I don't think I've tried to avoid those questions, have I?

George