I was deeply disturbed to read that the erstwhile hurricane which has inspired such panic on the East Coast has apparently been degraded to the status of a tropical storm, and a minor one at that. The winds that had been reported at 85 mph by the National Oceanic and Atmospheric Administration were being reported in the 25-35 mph range by various land stations. As we have seen repeatedly in the case of anthropogenic global warming/climate change, the disasters predicted by the scientific experts reliably turn out to be significantly less disastrous when they finally arrive.
Real life is not like the movies. In the world of Hollywood, the dire warnings of scientists are ignored by the authorities. In the real world, the dire warnings of scientists cause the authorities to overreact and throw billions of dollars at the experts in an attempt to find a solution to a nonexistent problem. Given this perverse incentive system, it should be no surprise that scientists across many disciplines spend so much more time prophesying doom than they do actually performing any science.
This may be the basis for an excellent argument for the unscientific nature of economics. Unlike scientists, credentialed economists spend most of their time denying that there are any problems with the economy or the financial system at all, despite the fact that the real U3 unemployment rate, based on the Bureau of Labor Statistics’ reported numbers, is higher than it was in the Great Depression years of 1930 and 1931. In fact, once one accounts for the growth in federal employment, it is apparent that U3 unemployment is now 74 percent higher than it was in 1930.
Since the economy is not presently facing the prospect of a double-dip recession, but is rather sliding more deeply into the Second Great Depression, even economists who deny the obvious reality have been looking to the past for ideas about how the economic situation can be ameliorated. Paul Krugman, the Nobel Prize winner who was inspired to study economics by reading Isaac Asimov’s “Foundation” series, unsurprisingly had one of the more insane creative ideas, in suggesting that America prepare for a fake alien war.
“If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better … there was a “Twilight Zone” episode like this in which scientists fake an alien threat in order to achieve world peace. Well, this time, we don’t need it, we need it in order to get some fiscal stimulus.”
Of course, according to the Neo-Keynesian stimulus freaks who have never seen an economic contraction they did not believe requires “a program of government spending plus an expansionary policy by the Fed,” the massive damage caused by a hurricane destroying the largest city in America would also provide a huge boost to economic growth. The ironic thing is that they are right, not due to any appeal to the Broken Window Fallacy, but because anything that would prevent Wall Street from skimming off as much as 46 percent of all the domestic corporate profits in America and draining trillions more from the American taxpayer courtesy of their servants in the federal government would go far toward freeing the American economy from the parasitical weight of its massive financial sector. Most of the crushing debt burden that presently afflicts the American economy was not borrowed by the federal government, or even private households, but rather the financial institutions, whose debts grew from less than one percent of the national total in 1946 to 32.7 percent in 2008.
In light of the failure of Hurricane Irene to perform as anticipated and Seal Team Six’s termination of the only man proven capable of breaking windows in New York City, Paul Krugman’s imaginary alien war may be the only option that a desperate U.S. government finds palatable as it faces an choice between Quantitative Easing III and openly admitting to the American public the true extent of the economic catastrophe Wall Street has created.