Bang for the Buck
By: Colin Combs
Last Friday, economics professor Tyler Cowen wrote in the New York Times that “the lack of major wars may be hurting economic growth”. This isn’t the usual Keynesian argument of how war supposedly helps the economy by “boosting spending”, as if the problems of the economy come from consumers not aligning to the production plans of the producers rather than the other way. No, instead Cowen’s argument is that:
“…the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy… Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War… War brings urgency those governments otherwise fail to summon.”
Thus Cowen concludes that the true key to innovation is not entrepreneurship or savings, but an ever-present fear of imminent death. While we may indeed concede that the government might actually be talented at imposing such a regime of terror, calling this “economic growth” in any sense of the term is both ridiculous and repugnant. And indeed Cowen does backpedal a bit from such a stance, saying that “a largely peaceful world with 2 percent G.D.P. growth has some big advantages that you don’t get with 4 percent growth and many more war deaths.” Even this position grants too much to the supposed blessings of destruction though.
True economic growth isn’t higher GDP numbers, but in how well the economy serves the consumers. War, by devoting resources towards the production of weapons and research into nuclear warheads, must necessarily draw these resources away from other lines of production and research that otherwise would be used to satisfy the needs and wants of consumers. War thus turns production away from the creation of useful things, and instead makes people waste resources simply trying to get back to the same position of safety they were at before. One might as well try to claim that the economy benefits from vandals breaking someone’s window to help “spur innovation in window technology”.
The thing about innovation is that people don’t know what it will be, or even if they want or need it, before inventors, entrepreneurs, investors, and workers bring the product to the market. That’s why it’s called an innovation. The important thing is having a system that can let us tell which innovations improve our standards of living and which innovations take away from more important things. The free market does this by entrepreneurs continually being subjected to the continual test of the profit and loss. And people are constantly trying to innovate on the market so that they can make more and more money. War does not lead to greater innovation; it only changes the focus of said innovation from ways of improving their lives to ways of more efficiently killing our enemies.