Guns and (I Can’t Believe It’s Not) Butter

The guns vs. butter concept is among the oldest macro-econ models ever conjured.  At its most basic, the guns vs. butter model suggests that the more of your resources you put into non-productive activities (guns), the less you available for productive activities (butter).  And, frankly, that’s just common sense, isn’t it?

The real problem is just how we define productive and non-productive activities.  For an economist, it’s fairly simple.  Productive activities spur growth through excess production and associated income and savings and investment.  Non-productive activities merely consume resources and/or become obstacles to productive activities.

Peacenik- econo-philosophists, for instance, take near-constant umbrage with virtually any defense spending, often lamenting how little it leaves for their cherished (and, oh so “buttery”) social programs.  As it happens, though, social spending by the government is as likely to be as “productive” as defense spending.

Here, in the hypothetical semi-libertarian “real world”, it seems clear (as suggested by the above cartoon) that a certain amount must be spent on defense (and, yes, even roads), if only to stave off the marauding hordes, whoever they might be (warning: poetry diversion).  And, sorry, but no, the handing out of “butter” to merely and temporarily pacify the marauding hordes isn’t quite the same thing as actually being productive.  In the long-run it tends to cost even more than guns.

For the record, we’re not in the ongoing financial crisis because of too much spending on the Iraqi (or Afghanistan) war or, for that matter, as the victims of greedy bankers.  We’re in this fix mostly as a result of non-productive psuedo-butter spending in both the public and private sectors.  Even here at home.

I happen to know for a fact that Mrs. Tuttle and I have spent quite a lot over the years on non-productive “guns”, some of which included actual guns.  But there were also boats, horses, guitars, books, DVD rentals, clothes we never liked or wore, and, more generally, various crappy merchandise that was simply thrown out when it failed to live up to it’s advertising hype.

But, hey, that’s our money, our time, our passion, our quite human lives.  We’re trying to do better.  Still, it’s quite another thing altogether when that spending is foisted upon us by – who else? – the marauding hordes themselves.  Speaking of which, this latest abuse (fresh from the advancing horde) plans to grant yet more special dispensations for those who’ve run up too much debt.  What else is new?  Looks like butter, but it isn’t.

Just how long do you think any of us can survive when we consistently punish (or tax) productive activities to pay for non-productive ones?  There’s an old farmer’s saying that comes to mind here:  “don’t ever eat your seed corn”.  This might be worse: it feels a bit like trading my butter to buy guns to give to the marauding hordes.  Not too smart, eh?

– HT

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