The point is simple: Marx is a compelling theorist and has legitimate critiques of capitalism, and there are large groups of educated, intelligent, good people who feel like Marx has their back in areas capitalism turns its back on. If you write him off, you are oversimplifying and underestimating Marxism.
World War II is often credited with bringing the U.S. out of the Great Depression, which is twisted. Frederic Bastiat (my favorite) would call this the “broken window fallacy”, pointing out that destruction is not profit. A shoemaker who spends two francs repairing a broken window is back where he started, neutral, although the window repairman is grateful for the support. It would have been better if the shoemaker could have spent that money on new shoes, or anything that results in a net positive. If someone goes down the street throwing rocks through windows, is that good or bad for the economy? If someone invents an unbreakable window, is that good or bad for the economy? Is it economically beneficial to crank out ships that are just going to get sunk by submarines? People are dying by the millions, cities are being leveled, and your conclusion is this boosted the economy? Twisted.
The Federal Reserve has used every tool they have to incentivize spending and borrowing, measures that exceed their actions at any other point in history. Macroeconomic tools are like adjusting the throttle and turning the wheel on the Titanic—there is going to be significant lag before your speed and course adjusts, and by that time you may be trying to steer in a different direction. If you’ve ever driven a boat, you understand. The U.S. economy is the biggest boat ever built.
As businesses start opening back up and people get back to work and money starts flowing again, the big questions are how quickly it happens and to what degree demand returns. As months pass, the number of unpaid mortgages is only going to increase, and forbearance can’t last forever. As consumers start spending again, their habits and preferences are going to be different. Some jobs are never going to come back, and other jobs may be created. We’re coming back to a different world than we left, and the math may not add up.
We’re beating the virus, and it’s unclear how formidable of an opponent it is or ever was, but the worst thing that could happen at this point is for us to get overconfident and empty the bench too soon. Framed a different way, I’ve seen enough horror movies to know it’s a mistake to assume the serial killer you’re trapped in the house with is incapacitated, and letting your guard down—you will regret it. Rule #2: Double Tap.
If a lumberjack cuts down a tree and sells it to a carpenter, and the carpenter makes a rocking chair and sells it to Home Depot, and Home Depot sells it to a hipster who wants a rocking chair on his 4′ x 6′ apartment patio, the only sale counted in GDP is that final sale. It’s counted in “consumer spending”, which makes up ~67% of total GDP. If the carpenter had sold it to Cracker Barrel, it would have been counted in “business investment” (~18% of GDP). Who remembers the equation and what is coming next? C+I+G+(x-m)=GDP. If the Bureau of Economic Analysis bought the chair for their waiting room, it would be counted in “government spending” (~17% of GDP). And, finally, if Kim Jong Un bought the rocking chair for the DMZ, it would be counted in exports (~-5% of GDP; we import more than we export). Simple enough, right?
You don’t have to be a general sending men into battle to actively weigh the value of human lives versus other objectives and goals. We could give every person who gets on every airplane a parachute, but it’s not worth the cost. We could ban pools, or double-down—why don’t we ban swimming entirely? It’s not worth the cost, that’s why.
This is how wars are waged, now. Data collection. Misinformation campaigns. I can hear all the teens screaming and scratching and clawing to keep their unfettered access to their hits of dopamine, justifying it as harmless fun. But what if it’s not? What if it’s the Trojan horse? Pause for a second and consider that TikTok could be weaponized. Is that impossible? If you say yes, it doesn’t prove anything other than you’re an addict and need help.
First, consider the complications of the situations these 20-ish-year-old athletes are placed into. How good are their coaches? How healthy is the locker room morale? Who are they competing with to get on the field, and who is mentoring them, if anyone? Those things matter more than we can ever know, and I think this adds to the argument against our capability to predict human behavior. Since it’s impossible to measure any of those factors or even understand the number of variables at play, we just do what humans do best when faced with complexity: ignore it! If someone plays a lot and scores touchdowns, he’s great, and if someone doesn’t play a lot and doesn’t score touchdowns, he sucks.
Because economists are trained to think in terms of opportunity costs, the line blurs between reality and what-could-have-been. As an example, let’s circle back to housing. If you live in your parent’s basement rent-free and have a job that pays you $40,000 per year, I would say not spending money on housing is, for all intents and purposes, the same as making ~$52,000 per year. Why? Because paying for housing takes up ~30% of the average Americans budget! Not paying for housing is no different than having a 30% higher income. This is the point in class where I would *politely* remind the sophomores that thinking of an exception to the general statement I just made does not mean you need to raise your hand and point it out.