John Cochrane on stimulus and defence spending

“Fiscal stimulus” is the prediction that even completely wasted government spending is good for the economy. Paul Krugman recommended, with refreshing clarity, that the US government fake an alien invasion so we could spend trillions of dollars building useless defenses. (I’m not exactly sure why he does not call for real defense spending. After all, if building aircraft carriers saved the economy in 1941, and defenses against imaginary aliens would save the economy in 2013, it’s not clear why real aircraft carriers have the opposite effect. But I’m still working on the nuances of new-Keynesianism, so I’ll let him explain the difference. I’m not a big fan of huge defense spending anyway.)

Source.

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14 Responses to John Cochrane on stimulus and defence spending

  1. Mk50 of Brisbane

    Defence spending is a dead loss just like any insurance policy spending is.

    After all, who the hell needs to expend money on fire insurance… until your house burns down.

    SO the trick is not to over-insure, and not to under-insure. In turn, this demands good knowledge of and comprehensive understanding of the risks the country faces.

    The current ‘government’ of Australia’s understanding of the escalating risks in our region are encapsulated by this statement: “Look, a Unicorn!”

  2. “SO the trick is not to over-insure, and not to under-insure. In turn, this demands good knowledge of and comprehensive understanding of the risks the country faces.”

    Not quite right. Telstra doesn’t insure its vehicles despite more attractive rates through bulk discounts. Why? Because while the risk vs reward ratio is similar, the impact of the risks is far lower as the risk is at any one time only to a miniscule fraction of its fleet.

    The reason we insure our own vehicles is because the impact is severe in that it represents 100% or maybe 50% of our vehicular assets.

    So, defence spending is a dead loss just like any insurance policy, but only in terms of ultimately spending more than you otherwise would, over the longest timeline. Of course, the reason we have defence spending is due to the impact of the risk being realised.

    Anyway, you’re missing the point, which is that Krugman is an imbecile.

  3. .

    Mark 50

    Should we get Astute class or Virgina class subs?

    I think the Virginia is better because it’s bigger.

    I still think my idea of having a small fleet of SSB(N)s with SLBMs with MIRV payloads but armed with conventional, precision guided munitions and sub munitions, along with being part of a missile defence shield.

    You could launch the delivery of a strike package at the start of a conventional, limited war like Iraq in a matter of minutes.

  4. Rodney

    Surely it would be environmentally prefferable to simlply hand money out at random, or better still allow people to take as much as they like. As long as they do not spend it on tobacco.
    What about organically grown tobacco? Is it OK?

  5. Mk50 of Brisbane

    Virginias on a combined buy and lease deal. We buy the hulls and weapons systems and lease the propulsion system in the hulls, also leasing USN engineering crews or recruiting retired USN or RN nukey boat engineering staff until we can grow our own. That will take at least a decade.

    We’d have to do an ‘Australian content’ deal with the US but that should be reasonably easy.

    One alternative is to lease Virginias for set periods. That’s probably a bit harder to arrange.

    Another alternative is to buy-and-refit Los Angeles class as the USN retires them (which it does prematurely in quite a few cases, there are some low-mileage LA’s sitting alongside the wharf). Cheaper, but you are talking higher risk of maintenance issues. Thats not actually saying much as the build quality on ever USN nuclear vessel has to be seen to be believed. Theya re simply the best-designed and best-built vessels ever made.

  6. boy on a bike

    also leasing USN engineering crews or recruiting retired USN or RN nukey boat engineering staff until we can grow our own.

    Shouldn’t that be “glow our own”?

  7. Mk50, probably the best way would be to buy four Virginia class subs, and six of the refurbished Los Angeles class. Use the LA class for patrolling and disburse the Virginia Class to threat areas as needed.

  8. dianeh

    Why fake an alien invasion to increase defense spending?

    Why not just increase spending on space exploration? Instead of cancelling NASA’s plans, the administration could have supported them, made a case and had the support of the people.

    Mankind could be exploring the universe instead of building bloody windmills and wasting money on other green boondoggles and the like.

    But I do get it. Krugman doesnt want to use the existing money more wisely, he just wants to spend more on any bullshit things. The Beer Whisperer is right – Krugman is an imbecile.

  9. Chris M

    I’m not a big fan of huge defense spending anyway.

    A few cheap nukes should be sufficient? Some other countries think that too.

  10. Tator

    MK50,
    I would prefer the Virginia Class which due to their modular design would be more flexible to customise and upgrade for Australia’s strategic needs if/when we had them built.

  11. Mk50 of Brisbane

    AGreed. The modularity of the V’s is amazing, and we can build the damned modules here. What’s surpsising about the V’s is that the USN is finally showing signs of catching up with the offshore oil and gas industry technology level and operating philosophies with this class.

  12. Jim Rose

    I thought krugman was against the war in Iraq and the surge

  13. .

    AGreed. The modularity of the V’s is amazing, and we can build the damned modules here. What’s surpsising about the V’s is that the USN is finally showing signs of catching up with the offshore oil and gas industry technology level and operating philosophies with this class.

    That’s actually very interesting.

    How long (would you guess) until the build quality gets as good as the Los Angeles class?

    I’m still pushing the conventionally armed, multiple payload missile carrying boomers…

  14. The LA class can be hollowed out for other purposes as we build the Virginia class here.
    It’s more an options thing.

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