How the Dismal Science Gets It Wrong: Welcome to the End of the Age of Malthus?

Dean Baker, following on Robert Skidelsky and Izabella Kaminska, notes something very fundamental about our current economic problems (boldface mine):

The most important point to realize is that the problem facing wealthy countries at the moment is not that we are poor, as the stern proponents of austerity insist. The problem is that we are wealthy. We have tens of millions of people unemployed precisely because we can meet current demand without needing their labor.

This was the incredible absurdity of the misery that we and other countries endured in the Great Depression and that Keynes sought to explain in The General Theory. The world did not suddenly turn poor in 1929 following the collapse of the stock market. Our workers had the ability to produce just as many goods and services the day after the collapse as the day before, the problem was that after the crash there was a lack of demand for these goods and services.

If you’re a pessimist, you could view this as a Judge Dredd economy, but there’s an opportunity here:

In 1900, about half of the U.S. population was engaged in agriculture. While some of this was ‘non-essential’ in that the U.S. exported these products, that’s still a huge fraction. Today, less than two percent are engaged in agriculture. Yet somehow we keep most people employed. There were dislocations during the shift, such as the migration northward of African-Americans as sharecropping fell by the wayside (not that sharecropping was a wonderful living).

We can find plenty of worthwhile things for people to do, even if they are not ‘essential’: arts, education, research, improving our infrastructure. If we still lived in a world where we needed half of our workers on the farm or else we couldn’t eat, funding these things would be wasteful.

In the West at least, we’re not living in Malthus’ dismal world where we are one step away from starvation, yet that seems to be an implicit assumption in all of our discourse. We can be ‘wasteful’ in the sense that so-called waste–that is, art, education, science–improves the quality of life.

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3 Responses to How the Dismal Science Gets It Wrong: Welcome to the End of the Age of Malthus?

  1. Min says:

    This is not a new problem, penury in the midst of plenty. It goes back to before the Great Depression. It formed the basis for much of Dickens. England was the richest nation in the world in those days, yet many of its citizens lived in grinding poverty. We are better off, richer today. But our basic problem is the same. The solution is mainly political.

  2. albanaeon says:

    A very good point. We definitely do have this idea that we are moments from starvation, when it’s just not likely. At least if we had a society that valued all its people instead showering the already rich with more wealth.
    If wishes were horses, and all…

  3. Misaki says:

    The comments seemed to criticize it mostly on the grounds of “we can’t force poor people to work less!!1” with at least one comment also saying that unemployed workers can’t do every job that is out there. Most people who applied to McDonald’s last year can’t do PhD-level work.

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