The murmur of the snarkmatrix…

August § The Common Test / 2016-02-16 21:04:46
Robin § Unforgotten / 2016-01-08 21:19:16
MsFitNZ § Towards A Theory of Secondary Literacy / 2015-11-03 21:23:21
Jon Schultz § Bless the toolmakers / 2015-05-04 18:39:56
Jon Schultz § Bless the toolmakers / 2015-05-04 16:32:50
Matt § A leaky rocketship / 2014-11-05 01:49:12
Greg Linch § A leaky rocketship / 2014-11-04 18:05:52
Robin § A leaky rocketship / 2014-11-04 05:11:02
P. Renaud § A leaky rocketship / 2014-11-04 04:13:09
Jay H § Matching cuts / 2014-10-02 02:41:13

Economic Capacity

The Keynesian theory of government stimulus rests on the idea that economies in recessions don’t suffer from a real loss of wealth (like a famine that wipes out your crop) but an excess of economic capacity (when your crop rots in the silo because you can’t get it to the market). Keynes contrasted the two ideas by referring to “a crisis of poverty” versus “a crisis of abundance.” Money spent by the government, in addition to creating new real wealth in the form of infrastructure or whatever, works by utilizing this unused capacity — especially the human capital, by putting people to work.

But underutilized capacity isn’t just people who are out of work — it’s the goods rotting in our warehouses. The recent GDP dip was saved from staggering free-fall only by a quirk in the way these goods are measured:

The actual decline in the gross domestic product — at a 3.8 percent annual rate — fell short of the 5 to 6 percent that most economists had expected for the fourth quarter. But that was because consumption collapsed so quickly that goods piled up in inventory, unsold but counted as part of the nation

January 31, 2009 / Uncategorized

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