While rewatching the Keynes vs. Hayek rap video I started to think about the food rationing in World War II and victory gardens, where the public was encouraged to grow vegetables in their own backyards. This would increase the food supply and allow workers to focus on munitions instead of feeding the country.
What finally struck me is, isn't this a bad thing to do for the economy from a Keynesian perspective?
World War II is often heralded as the great Keynesian fix for the Great Depression: The war effort increased government spending, thus putting people to work and money in their hands, allowing them to buy more. Critics like me say wars destroy more than they build, including the things people actually need, and that consumer spending didn't increase until after the war.
But stepping into the Keynesian mindset, home production of food lowers aggregate demand. I've said over and over that local food production fails to take advantage of economies of scale and ties people down and prevents them from doing more productive things with their time. Self-sufficiency makes people poorer because they fail to take advantage of comparative advantage.
There are unfixable conflicts between Keynesian economics and the crude economic model thrown together by localists. Victory gardens help solve food shortages, but there is no reason to think they improve total prosperity under normal circumstances, despite some recent claims about the one at the White House.
Whatever science-based economic perspective one comes from, it's clear to see that home gardens make a nice hobby, but are not an integral part of an advanced economy.
Friday, May 6, 2011
Victory gardens and demand-side economics
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The victory gardens could be seen as a reaction to decreased supply. To me that is a tiny bit more evidence that you should be focusing on the supply side of the equation, if you decide you must do anything at all. Demand does not always translate into supply.
ReplyDeleteThe reverse is true of course, but less so I think. An increase in the supply of oil would lower prices and I would consume more. If cheeze its became more plentiful and the price dropped I'd buy more of those.
I think you have to see those victory gardens as a method to decrease demand in one area, a reasonable thing to do in a war, but as you say, a terrible thing to do if the theory is boosting demands fixes everything/spending is all that matters.