Thursday, December 11, 2008

Of War and Peace and GDP

Paul Krugman comments on an argument by Mark Thoma, Bob Hall and Susan Woodward, wherein Krugman asserts that the military spending resulted in a one-for-one effect on GDP during WWII because of rationing. But, Thoma et al., also look at the Koren War and see a similar effect. Now, I was born during the Koren War, so I have no direct memory of it. But, as far as I know, there was no rationing during that one. So, maybe there is more to this than Krugman allows.

Still the argument that infrastructure spending is equivalent to military spending seems a big stretch. I don't know of anyone who can use a tank or cluster bomb to increase productivity. Making stuff that is then only useful for destroying things and killing people somehow doesn't seem equivalent to building highways, mass transit, or electric power generation and distribution systems.

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