Regarding Napoleon Chagnon

Napoleon Alphonseau Chagnon (1938-2019) was a noted anthropologist to whom the label “controversial” was applied. Some of the story is told in this surprisingly objective New York Times article about Chagnon’s life and death. Matthew Blackwell gives a more complete account in “The Dangerous Life of an Anthropologist” (Quilette, October 5, 2019).

Chagnon’s sin was his finding that “nature” trumped “nurture”, as demonstrated by his decades-long ethnographic field work among the Yanomamö, indigenous Amazonians who live in the border area between Venezuela and Brazil. As Blackwell tells it,

Chagnon found that up to 30 percent of all Yanomamö males died a violent death. Warfare and violence were common, and duelling was a ritual practice, in which two men would take turns flogging each other over the head with a club, until one of the combatants succumbed. Chagnon was adamant that the primary causes of violence among the Yanomamö were revenge killings and women. The latter may not seem surprising to anyone aware of the ubiquity of ruthless male sexual competition in the animal kingdom, but anthropologists generally believed that human violence found its genesis in more immediate matters, such as disputes over resources. When Chagnon asked the Yanomamö shaman Dedeheiwa to explain the cause of violence, he replied, “Don’t ask such stupid questions! Women! Women! Women! Women! Women!” Such fights erupted over sexual jealousy, sexual impropriety, rape, and attempts at seduction, kidnap and failure to deliver a promised girl….

Chagnon would make more than 20 fieldwork visits to the Amazon, and in 1968 he published Yanomamö: The Fierce People, which became an instant international bestseller. The book immediately ignited controversy within the field of anthropology. Although it commanded immense respect and became the most commonly taught book in introductory anthropology courses, the very subtitle of the book annoyed those anthropologists, who preferred to give their monographs titles like The Gentle Tasaday, The Gentle People, The Harmless People, The Peaceful People, Never in Anger, and The Semai: A Nonviolent People of Malaya. The stubborn tendency within the discipline was to paint an unrealistic façade over such cultures—although 61 percent of Waorani men met a violent death, an anthropologist nevertheless described this Amazonian people as a “tribe where harmony rules,” on account of an “ethos that emphasized peacefulness.”…

These anthropologists were made more squeamish still by Chagnon’s discovery that the unokai of the Yanomamö—men who had killed and assumed a ceremonial title—had about three times more children than others, owing to having twice as many wives. Drawing on this observation in his 1988 Science article “Life Histories, Blood Revenge, and Warfare in a Tribal Population,” Chagnon suggested that men who had demonstrated success at a cultural phenomenon, the military prowess of revenge killings, were held in higher esteem and considered more attractive mates. In some quarters outside of anthropology, Chagnon’s theory came as no surprise, but its implication for anthropology could be profound. In The Better Angels of Our Nature, Steven Pinker points out that if violent men turn out to be more evolutionarily fit, “This arithmetic, if it persisted over many generations, would favour a genetic tendency to be willing and able to kill.”…

Chagnon considered his most formidable critic to be the eminent anthropologist Marvin Harris. Harris had been crowned the unofficial historian of the field following the publication of his all-encompassing work The Rise of Anthropological Theory. He was the founder of the highly influential materialist school of anthropology, and argued that ethnographers should first seek material explanations for human behavior before considering alternatives, as “human social life is a response to the practical problems of earthly existence.” Harris held that the structure and “superstructure” of a society are largely epiphenomena of its “infrastructure,” meaning that the economic and social organization, beliefs, values, ideology, and symbolism of a culture evolve as a result of changes in the material circumstances of a particular society, and that apparently quaint cultural practices tend to reflect man’s relationship to his environment. For instance, prohibition on beef consumption among Hindus in India is not primarily due to religious injunctions. These religious beliefs are themselves epiphenomena to the real reasons: that cows are more valuable for pulling plows and producing fertilizers and dung for burning. Cultural materialism places an emphasis on “-etic” over “-emic” explanations, ignoring the opinions of people within a society and trying to uncover the hidden reality behind those opinions.

Naturally, when the Yanomamö explained that warfare and fights were caused by women and blood feuds, Harris sought a material explanation that would draw upon immediate survival concerns. Chagnon’s data clearly confirmed that the larger a village, the more likely fighting, violence, and warfare were to occur. In his book Good to Eat: Riddles of Food and Culture Harris argued that fighting occurs more often in larger Yanomamö villages because these villages deplete the local game levels in the rainforest faster than smaller villages, leaving the men no option but to fight with each other or to attack outside groups for meat to fulfil their protein macronutrient needs. When Chagnon put Harris’s materialist theory to the Yanomamö they laughed and replied, “Even though we like meat, we like women a whole lot more.” Chagnon believed that smaller villages avoided violence because they were composed of tighter kin groups—those communities had just two or three extended families and had developed more stable systems of borrowing wives from each other.

There’s more:

Survival International … has long promoted the Rousseauian image of a traditional people who need to be preserved in all their natural wonder from the ravages of the modern world. Survival International does not welcome anthropological findings that complicate this harmonious picture, and Chagnon had wandered straight into their line of fire….

For years, Survival International’s Terence Turner had been assisting a self-described journalist, Patrick Tierney, as the latter investigated Chagnon for his book, Darkness in El Dorado: How Scientists and Journalists Devastated the Amazon. In 2000, as Tierney’s book was being readied for publication, Turner and his colleague Leslie Sponsel wrote to the president of the American Anthropological Association (AAA) and informed her that an unprecedented crisis was about to engulf the field of anthropology. This, they warned, would be a scandal that, “in its scale, ramifications, and sheer criminality and corruption, is unparalleled in the history of Anthropology.” Tierney alleged that Chagnon and Neel had spread measles among the Yanomamö in 1968 by using compromised vaccines, and that Chagnon’s documentaries depicting Yanomamö violence were faked by using Yanomamö to act out dangerous scenes, in which further lives were lost. Chagnon was blamed, inter alia, for inciting violence among the Yanomamö, cooking his data, starting wars, and aiding corrupt politicians. Neel was also accused of withholding vaccines from certain populations of natives as part of an experiment. The media were not slow to pick up on Tierney’s allegations, and the Guardian ran an article under an inflammatory headline accusing Neel and Chagnon of eugenics: “Scientists ‘killed Amazon Indians to test race theory.’” Turner claimed that Neel believed in a gene for “leadership” and that the human genetic stock could be upgraded by wiping out mediocre people. “The political implication of this fascistic eugenics,” Turner told the Guardian, “is clearly that society should be reorganised into small breeding isolates in which genetically superior males could emerge into dominance, eliminating or subordinating the male losers.”

By the end of 2000, the American Anthropological Association announced a hearing on Tierney’s book. This was not entirely reassuring news to Chagnon, given their history with anthropologists who failed to toe the party line….

… Although the [AAA] taskforce [appointed to investigate Tierney’s accusations] was not an “investigation” concerned with any particular person, for all intents and purposes, it blamed Chagnon for portraying the Yanomamö in a way that was harmful and held him responsible for prioritizing his research over their interests.

Nonetheless, the most serious claims Tierney made in Darkness in El Dorado collapsed like a house of cards. Elected Yanomamö leaders issued a statement in 2000 stating that Chagnon had arrived after the measles epidemic and saved lives, “Dr. Chagnon—known to us as Shaki—came into our communities with some physicians and he vaccinated us against the epidemic disease which was killing us. Thanks to this, hundreds of us survived and we are very thankful to Dr. Chagnon and his collaborators for help.” Investigations by the American Society of Human Genetics and the International Genetic Epidemiology Society both found Tierney’s claims regarding the measles outbreak to be unfounded. The Society of Visual Anthropology reviewed the so-called faked documentaries, and determined that these allegations were also false. Then an independent preliminary report released by a team of anthropologists dissected Tierney’s book claim by claim, concluding that all of Tierney’s most important assertions were either deliberately fraudulent or, at the very least, misleading. The University of Michigan reached the same conclusion. “We are satisfied,” its Provost stated, “that Dr. Neel and Dr. Chagnon, both among the most distinguished scientists in their respective fields, acted with integrity in conducting their research… The serious factual errors we have found call into question the accuracy of the entire book [Darkness in El Dorado] as well as the interpretations of its author.” Academic journal articles began to proliferate, detailing the mis-inquiry and flawed conclusions of the 2002 taskforce. By 2005, only three years later, the American Anthropological Association voted to withdraw the 2002 taskforce report, re-exonerating Chagnon.

A 2000 statement by the leaders of the Yanomamö and their Ye’kwana neighbours called for Tierney’s head: “We demand that our national government investigate the false statements of Tierney, which taint the humanitarian mission carried out by Shaki [Chagnon] with much tenderness and respect for our communities. The investigation never occurred, but Tierney’s public image lay in ruins and would suffer even more at the hands of historian of science Alice Dreger, who interviewed dozens of people involved in the controversy. Although Tierney had thanked a Venezuelan anthropologist for providing him with a dossier of information on Chagnon for his book, the anthropologist told Dreger that Tierney had actually written the dossier himself and then misrepresented it as an independent source of information.

A “dossier” and its use to smear an ideological opponent. Where else have we seen that?

Returning to Blackwell:

Scientific American has described the controversy as “Anthropology’s Darkest Hour,” and it raises troubling questions about the entire field. In 2013, Chagnon published his final book, Noble Savages: My Life Among Two Dangerous Tribes—The Yanomamö and the Anthropologists. Chagnon had long felt that anthropology was experiencing a schism more significant than any difference between research paradigms or schools of ethnography—a schism between those dedicated to the very science of mankind, anthropologists in the true sense of the word, and those opposed to science; either postmodernists vaguely defined, or activists disguised as scientists who seek to place indigenous advocacy above the pursuit of objective truth. Chagnon identified Nancy Scheper-Hughes as a leader in the activist faction of anthropologists, citing her statement that we “need not entail a philosophical commitment to Enlightenment notions of reason and truth.”

Whatever the rights and wrong of his debates with Marvin Harris across three decades, Harris’s materialist paradigm was a scientifically debatable hypothesis, which caused Chagnon to realize that he and his old rival shared more in common than they did with the activist forces emerging in the field: “Ironically, Harris and I both argued for a scientific view of human behavior at a time when increasing numbers of anthropologists were becoming skeptical of the scientific approach.”…

Both Chagnon and Harris agreed that anthropology’s move away from being a scientific enterprise was dangerous. And both believed that anthropologists, not to mention thinkers in other fields of social sciences, were disguising their increasingly anti-scientific activism as research by using obscurantist postmodern gibberish. Observers have remarked at how abstruse humanities research has become and even a world famous linguist like Noam Chomsky admits, “It seems to me to be some exercise by intellectuals who talk to each other in very obscure ways, and I can’t follow it, and I don’t think anybody else can.” Chagnon resigned his membership of the American Anthropological Association in the 1980s, stating that he no longer understood the “unintelligible mumbo jumbo of postmodern jargon” taught in the field. In his last book, Theories of Culture in Postmodern Times, Harris virtually agreed with Chagnon. “Postmodernists,” he wrote, “have achieved the ability to write about their thoughts in a uniquely impenetrable manner. Their neo-baroque prose style with its inner clauses, bracketed syllables, metaphors and metonyms, verbal pirouettes, curlicues and figures is not a mere epiphenomenon; rather, it is a mocking rejoinder to anyone who would try to write simple intelligible sentences in the modernist tradition.”…

The quest for knowledge of mankind has in many respects become unrecognizable in the field that now calls itself anthropology. According to Chagnon, we’ve entered a period of “darkness in cultural anthropology.” With his passing, anthropology has become darker still.

I recount all of this for three reasons. First, Chagnon’s findings testify to the immutable urge to violence that lurks within human beings, and to the dominance of “nature” over “nurture”. That dominance is evident not only in the urge to violence (pace Steven Pinker), but in the strong heritability of such traits as intelligence.

The second reason for recounting Chagnon’s saga it is to underline the corruption of science in the service of left-wing causes. The underlying problem is always the same: When science — testable and tested hypotheses based on unbiased observations — challenges left-wing orthodoxy, left-wingers — many of them so-called scientists — go all out to discredit real scientists. And they do so by claiming, in good Orwellian fashion, to be “scientific”. (I have written many posts about this phenomenon.) Leftists are, in fact, delusional devotees of magical thinking.

The third reason for my interest in the story of Napoleon Chagnon is a familial connection of sorts. He was born in a village where his grandfather, also Napoleon Chagnon, was a doctor. My mother was one of ten children, most of them born and all of them raised in the same village. When the tenth child was born, he was given Napoleon as his middle name, in honor of Doc Chagnon.

Politics Trumps Economics

Years ago I was conversing with a hard-core economist, one of the benighted kind who assume that everyone behaves like a wealth-maximizing robot. I observed that even if he were right in his presumption that economic decisions are made rationally and in a way that comports with economic efficiency, government stands in the way of efficiency. In my pithy phrasing: Politics trumps economics.

So even if the impetus for efficiency isn’t blunted by governmental acts (laws, regulations, judicial decrees), those acts nevertheless stand in the way of efficiency, despite clever workarounds. A simple case in point is the minimum wage, which doesn’t merely drive up the wages of some workers, but also ensures that many workers are unemployed in the near term, and that many more workers will be unemployed in the long-term. Yes, the minimum wage causes some employers to substitute capital (e.g., robots) for labor, but they do so only to reduce the bottom-line damage of the minimum wage (at least in the near-term). Neither the employer nor the jobless is made better off by the employer’s machinations. Thus politics (the urge to regulate) trumps economics (the efficiency-maximizing state of affairs that would otherwise obtain).

I was reminded of my exchange with the economist by a passage in Jean-François Revel’s Last Exit to Utopia: The Survival of Socialism in a Post-Soviet Era:

Karl Jaspers, in his essay on Max Weber, records the following conversation between Weber and Joseph Schumpeter:

The two men met at a Vienna cafe… Schumpter indicated how gratified he was by the socialist revolution in Russia. Henceforth socialism would not be just a program on paper — it would have to prove its viability.

To which Weber … replied that Communism at this stage of development in Russia virtually amounted to a crime, and that to take this path would lead to human misery without equal and to a terrible catastrophe.

“That’s exactly what will happen,” agreed Schumpeter, “but what a perfect laboratory experiment.”

“A laboratory in which mountains of corpses will be heaped!” retorted Weber….

This exchange must have occurred at the beginning of the Bolshevik regime, since Max Weber died in 1920. Thus one of the twentieth century’s greatest sociologists and one of its greatest economists were in substantial agreement about Communism: they had no illusions about it and were fully aware of its criminogenic tendencies. On one issue, though, they differed. Schumpeter was still in thrall to a belief that Weber did not share, namely the illusion that the failures and crimes of Communism would serve as a lesson to humanity. [pp. 141-142]

Weber was right, of course. Politics trumps economics because people — especially people in power — will cling to counterproductive beliefs, even despite evidence that they are counterproductive. Facts and logic don’t stand a chance against power-lust, magical thinking, virtue-signalling, and the band-wagon effect.


Related posts:
“Intellectuals and Society”: A Review
The Left’s Agenda
The Left and Its Delusions
A Keynesian Fantasy Land
The Spoiled Children of Capitalism
Politics, Sophistry, and the Academy
Subsidizing the Enemies of Liberty
Income Inequality and Economic Growth
A Case for Redistribution, Not Made
Ruminations on the Left in America
Academic Ignorance
Superiority
Whiners
A Dose of Reality
God-Like Minds
Non-Judgmentalism as Leftist Condescension
An Addendum to (Asymmetrical) Ideological Warfare
The Rahn Curve Revisited
Retrospective Virtue-Signalling
Four Kinds of “Liberals”
Leftist Condescension
The Vast Left-Wing Conspiracy
Leftism As Crypto-Fascism: The Google Paradigm
What’s Going On? A Stealth Revolution

The Keynesian Fallacy and Regime Uncertainty

In “A Keynesian Fantasy Land,” I gave six reasons for the failure of “stimulus” spending to stimulate the economy, despite the insistence of leftists and left-wing economists that economic salvation is to be found in bigger government. The reasons, which I elaborate in the earlier post, are these:

1. “leakage” to imports

2. disincentivizing effects of government borrowing and spending (regime uncertainty)

3. timing and targeting problems (spending that is too late and misdirected)

4. reversed causality (lower aggregate demand as symptom, not cause)

5. the negative consequences of bail-outs

6. the unaccounted for complexity of human behavior

An article by Casey B. Mulligan, “Simple Analytics and Empirics of the Government Spending Multiplier and Other ‘Keynesian’ Paradoxes,” underscores the futility of “stimulus” spending. These are among Mulligan’s conclusions:

From a partial equilibrium perspective, it would be surprising if government purchases did not crowd out at least some private consumption, and that a reduction in factor supply did not result in less output. Yet some “New Keynesian” models, not to mention much public policy commentary, claim that today’s economy has turned this partial equilibrium reasoning on its head, even while it might have been historically valid. Among other things, individual firms and the aggregate private sector are alleged to leave their production invariant to changes in factor supply conditions during this recession. This paper shows how the government spending multiplier and the “paradox of toil” are related in theory, and examines evidence from this recession on the output effects of factor supply…

This paper does not contain a numerical estimate of the government purchases multiplier. However, its examination of data exclusively from the 2008-9 recession suggests that sectoral and aggregate employment and output vary with supply conditions in much the same way they did before the recession. The results contradict Keynesian claims that the government purchases multiplier would be significantly greater during the recession than it was before 2008, suggesting instead that historical estimates of the effects of fiscal policies are informative about fiscal policy effects in more recent years. Moreover, the supply incentives created by government spending cannot be ignored merely because 2008 and 2009 were recession years; rather incentives mattered as much as ever. Government purchases likely moved factors away from activities that would have supported private purchases. Unemployment insurance, food stamps, and other expanding means-tested government programs likely reduced employment and output during this recession, in much the same way they did in years past.

Compounding the futility of “stimulus” spending is the general climate of economic fear that Obama’s policies have engendered; for example:

Thanks to Regulatory Burdens, We’ve Got Both A Creditless Recovery and A Jobless Recovery (at Carpe Diem)

Why aren’t we seeing a jobs recovery? Maybe it’s ObamaCare’s fault (at Questions and Observations)

Home Depot Founder: Obama’s Regulations Are Killing Businesses (at Commentary)

As John Steele Gordon points out,

[t]he greatest periods of American economic growth came when taxes were very low—such as in the 19th century—or being lowered and simplified, as in the 1920s, 60s, and 80s. Inescapably, to tax wealth creation is to discourage it. But there is a large and politically potent segment of the population that, because its interests are now aligned with those of the government, seek to promote dependency through entitlements. This segment favors ever higher taxes (although they disguise the fact by demanding that only “the rich” pay their “fair share.”) But, as with regulation, high taxes inevitably produce low growth—and low growth threatens entitlements in the long term. If the United States remains in the doldrums for several more years without hope of a real turnaround, Medicare as it is currently constituted will go bankrupt in 2019. Raising taxes to prevent that will only slow overall growth, and that will actually defeat the purpose of saving Medicare.

So there is really no alternative to pursuing policies that encourage economic growth through private action by liberating the forces of the free market. A presidential candidate who finds a way to ground his economic policies in this core truth—and harnesses the idea to a larger and more optimistic understanding of the United States, both past and future, and resists the take-your-medicine tone that dominates the conservative policy discussion of the present moment—will be able to draw a sharp and effective contrast with the failures of the Obama years. (“Growth: The Only Way out of This Mess,” Commentary, July 2011)

But there is no point in cutting taxes unless government spending is cut — and cut drastically — for government spending, along with regulation, is the real drag on the economy. Only in the left’s magical thinking is government spending a good thing. In reality, it is a destructive force — even during recessions and depressions.

Related posts:
The Causes of Economic Growth
A Short Course in Economics
Addendum to a Short Course in Economics
The Indivisibility of Economic and Social Liberty
The Price of Government
The Fed and Business Cycles
The Price of Government Redux
The Mega-Depression
Ricardian Equivalence Reconsidered
The Real Burden of Government
Toward a Risk-Free Economy
The Rahn Curve at Work
How the Great Depression Ended
Microeconomics and Macroeconomics
The Illusion of Prosperity and Stability
Experts and the Economy
We’re from the Government and We’re Here to Help You
Estimating the Rahn Curve: Or, How Government Inhibits Economic Growth
Our Enemy, the State
Competition Shouldn’t Be a Dirty Word
The Stagnation Thesis
The Evil That Is Done with Good Intentions
Money, Credit, and Economic Fluctuations

A Keynesian Fantasy Land

This post examines practical reasons for the failure of “stimulus” to stimulate and the “multiplier” to multiply. The deeper truth is that the Keynesian multiplier is a mathematical fiction, as explained here, and government spending is in fact destructive of economic growth, as discussed here and in some of the posts listed at the end.

“Liberal” economists and pundits complain incessantly that the recovery from the Great Recession is weak, and in jeopardy, because the federal government hasn’t spent “enough” money. (See this for some examples of the “liberal” view.) How much is “enough” for Paul Krugman et al.? It is always more than the government spends, of course.

Why should that be? The blindingly obvious answer — but not obvious to Krugman and company — is that demand-side fiscal policy (i.e., government “stimulus” spending) is ineffective. If the economy depends on government spending, how does one explain the decades after the Civil War, when government spent less than 10 percent of GDP (vs. today’s 40 percent), while America’s economy grew faster than at any time in its history? It took World War II and regime change (the disruption of the New Deal by the war) to end the Great Depression. Mr. Roosevelt’s adoption of Mr. Keynes’s hole-digging prescription (the Civilian Conservation Corps and similar make-work projects) had nothing to do with it. Mr. Roosevelt may have been an excellent marketeer, but he was a dismal economic engineer.

This is not to reject supply-side fiscal policy: tax-rate reductions. When tax-rate reductions are prospectively permanent — as opposed to one-time tax rebates and “holidays” — they can and do spur economic growth. Christina Romer, former chair of Obama’s Council of Economic Advisers, once proved it — though she developed a convenient case of amnesia when she became a proponent of “stimulus.”

As any reputable economist will tell you, however, the best that one can expect of a temporary increase in government spending is a temporary increase in economic activity; it is a stop-gap until the economy recovers on its own. (And a reputable economist, unlike Krugman, will also tell you that a permanent increase in government spending diverts resources from productive uses — uses that yield economic growth and satisfy actual economic wants — toward less-productive and counter-productive ones, including the creation of paper-shuffling, regulatory bureaucracies.)

Despite the promises of Obama, Romer, and company, the “stimulus” has evidently failed to do much — if anything — to alleviate the Great Recession and its lingering aftermath. (See this, this, and this, for example.) Thus the wailing and gnashing of teeth by Krugman and company — who want to replicate the failure on a grander scale.

WHY THE “STIMULUS” FAILED TO STIMULATE: GENERAL OBSERVATIONS

What went wrong? Anthony de Jasay offers a piece of the explanation:

…In Keynesian parlance there is the multiplier effect and it is greater than 1. As long as there is spare capacity (unemployment) in the economy, the government ought to go on spending more, working through the multiplier, because the extra private saving takes care of the government dissaving and the extra consumption is, so to speak, a welcome windfall gain. Timidly refusing to generate it is criminal waste.

Despite truculent voices to the contrary, the Keynesian logic is faultless in that the conclusions do follow from the assumptions. Why it does not really work and why it singularly failed to work in 2009-2010 and maybe beyond, is that other things do not remain equal. Part of the extra spending stimulus fails to stimulate domestic income because as much as 0.3 of the multiplier might leak out through extra imports. Much of the rest may be offset by industry taking fright of the rising budget deficit and reducing investment, and consumers striving to reduce their indebtedness producing some saving to balance the government’s dissaving. The total effect of higher imports and lower investment might be a multiplier barely higher, or maybe even lower, than 1 and the stimulus stimulating nothing except the national debt. This is not the fault of Keynes but of those whose macro-economics exist in a fantasy land. (Library of Economics and Liberty, “Micro, Macro, and Fantasy Economics,” December 6, 2010)

Generally,

[t]he available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. (Robert J. Barro and Charles J. Redlick, “Stimulus Spending Doesn’t Work,” WSJ Online, October 1, 2009)

(For more on the subject see Barro’s “Government Spending Is No Free Lunch,” WSJ Online, January 22, 2009.)

WHY “STIMULUS” FAILS: SPECIFIC REASONS

Altogether, there are six reasons for the ineffectiveness of Keynsesian “stimulus.”

1. The “leakage” to imports, as indicated by de Jasay.

2. The disincentivizing effects of government borrowing and spending, to which de Jasay alludes.

As de Jasay suggests, industry (and the high-income earners who finance it) are being cautious about the implications of additional government debt. As I say here,

the sophisticat[ed] … institutions and persons who have the greatest interest in government’s actions [are] large corporations and persons in high-income brackets. They will react to government borrowing as if it would affect them and their heirs (corporate and individual).

That is to say, even if additional debt does not crowd out private-sector borrowing to finance business expansion, it will nevertheless inhibit investments in business expansion. This inhibiting effect is compounded by the reasonable expectation that many items in a “stimulus” package will become permanent fixtures in the government’s budget.

3. The timing-targeting problem.

The lag between the initial agitation for “stimulus” and its realization. In the extreme, the lag can be so great as to have no effect other than to divert employed resources from private to government uses. But even where there is a relatively brief lag, “stimulus” spending is essentially wasted if the result is simply to divert already employed resources from private to government uses.

The timing-targeting problem is one that strident Keynesians and their unsophisticated disciples in the media seem not to understand or care about. (They are happy as long as government “does something,” regardless of the cost.) The problem arises from the fundamental flaw in the Keynesian analysis: Economic output is portrayed as a homogeneous commodity, one that can be characterized  in terms of aggregate demand (AD) and aggregate supply (AS). Accordingly, in the Keynesian orthodoxy, all it takes to stimulate AD is to pump in some additional government spending (dG), and the rest takes care of itself.

Arnold Kling calls it “hydraulic” macroeconomics:

Once upon a time, Joe lived in Keynesiana, where he was a representative agent.

Joe worked in a GDP factory, making GDP. Every Monday morning, he went to work, and he worked five days a week. He was paid $1 for every 24-minute segment he worked, and he worked 100 segments (40 hours), so he earned $100 a week. Every Friday afternoon, Joe cashed his paycheck and went to the GDP factory outlet, where he spent it all on GDP.

One day, Joe decided that he needed to accumulate some savings. He made up a rule for himself. Knowing that he needed to consume at least $40 of GDP each week, he decided that his rule would be to save 20 percent of everything he earned over and above that $40. So the first week, that meant saving 20 percent of $60, or $12. So he cashed his $100 paycheck, but that Friday afternoon he only spent $88.

Next Monday, morning, Joe’s boss had some news. “A funny thing happened last week. We sold 12 percent less GDP than usual. So this week, we’re gonna put you on a short week. You work 88 segments, instead of 100.”

Joe was disappointed, because this meant he would only be paid $88 this week. Sticking to his new rule, he resolved to save 20 percent of $48, or $9.60. So that Friday afternoon, he cashed his $88 paycheck and spent $78.40.

Next Monday morning, Joe’s boss said. “Well, golly, it looks like we sold even less GDP last week. I’m afraid we’ll have to cut you back to 78.40 segments this week.” Still following his rule, Joe resolved to save 20 percent of $38.40, or $7.68. So he spent only $70.72 at the GDP factory outlet that Friday.

Seeing where this was going, the country asked Krug Paulman, the famous economist, what to do. He said, “The stupid people are saving too much. We need government to spend what the idiots are not spending.” So the government borrowed $29.28 from Joe and spent it at the GDP factory outlet.

Now, when Joe came to work on Monday morning, his boss said, “Good news, we sold 100 percent of what we used to sell, so you can work 100 segments this week.” Sticking to his rule, Joe saved $12 on Friday afternoon. But the government borrowed the $12 and spent it at the GDP factory outlet. They all lived happily ever after. (Library of Economics and Liberty, “Hydraulic Macro: A Fable,” August 30, 2009)

But in reality, economic activity is far more complex than that. One very important part of that reality the vast variety of goods and services changing hands, in response to constantly shifting tastes, preferences, technologies, and costs. The real economy bears no resemblance to the “hydraulic” one in which the homogeneous “fluid” is units of GDP. For “stimulus” — an increase in government spending (dG) — to generate an real increase GDP significantly greater than dG, several stringent conditions must be met:

a. dG must lead directly to the employment of resources that had been idled by a downturn in economic activity (or newly available resources that otherwise would lay idle), therefore eliciting the production of additional goods for delivery to consumers and businesses.

b. Accordingly, government functionaries must be able to distinguish between unemployment that occurs as a result of normal (and continuous) structural changes in the economy and unemployment that occurs because of a general slowdown in economic activity.

c. To the extent that the preceding conditions are satisfied, dG may be used to restore employment if government functionaries do the following things:

  • Ensure that dG is used to purchase goods and services that would have been produced in the absence of a general slowdown in economic activity.
  • Ensure that dG is used by those persons, businesses, and governmental units that have become unable to buy those goods and services because of a general slowdown in economic activity.
  • Allowing for shifts in tastes, preferences, technologies, etc., adjust the issuance, allocation, and use of dG so that goods and services are produced in accordance with those shifts in taste, etc.
  • Reduce dG as the demand for unemployed resources rises, in order to avoid the distorting and disincentivizing effects of inflation.

To the extent that dG is less than on-time and on-target, there is “leakage,” which causes the multiplier to recede toward a value of 1. It can easily slide below 1 — as Barro has found — because of the “leakage” to imports and the disincentivizing effects of government borrowing and spending.

4. Causality: Inadequate AD as symptom, not cause.

The fourth reason for the failure of the “stimulus” to stimulate is that it is does not address the cause of the drop in AD. A drop in AD usually is caused by an exogenous event, and that exogenous event usually is a credit crisis. Pumping money into the economy — especially when it results in the bidding up the prices of already employed resources — does not reinflate the punctured credit bubble that caused the slowdown.

If a credit crunch arises from a sharp rise in the rate of home-mortgage defaults — as in the case of the Great Recession — the obvious way to “solve” the problem is to prop up the defaulting borrowers and their lenders, and to do so quickly.

But, in practice, the propping up is hit-and-miss, and the misses have drastic consequences. Consider, for example, the decision not to bail out Lehman Brothers and the effects of that decision on financial markets.

Which leads into the fifth reason…

5. Inequity, moral hazard, and their consequences.

Any kind of “stimulus” that targets particular individuals and firms, in an effort to rectify their failures of judgment, has adverse political and economic effects.

Favorable treatment of defaulters and failing companies generates considerable popular resentment, which — in the present instance — has found a vocal and politically potent outlet in the Tea Party movement. Favorable treatment of defaulters and failing companies also creates moral hazard; that is, it encourage unwise risk-taking that can (and probably will) spark future crises, leading the government to assume more obligations and impose more regulations, in a futile effort to change human nature.

All of this adds up to a climate of political contention and financial pessimism — conditions that militate against consumer confidence and business expansion.

6. The human factor.

The preceding five reasons for the ineffectiveness of Keynesian “stimulus” point to a sixth, fundamental reason: the human factor.

Models are supposed to mirror reality, not the other way around. Those who cling to the Keynesian multiplier would like the world to comply with it. But the world does not because it is filled with people, whose behavior is not determined (or described) by a simplistic model but by their responses to incentives, their political predispositions, their informed and reasonable skepticism about the consequences of government intervention in economic matters, and — above all else — their fallibility. And, believe or not, government officials and bureaucrats are no less fallible than the “ordinary” citizens whose lives they would like to organize.

The human factor is an inconvenient truth. But “liberals,” in their usual arrogance and ignorance prefer magical thinking to reality. Belief in the Keynesian multiplier is a prime example of magical thinking.

Related posts:
The Causes of Economic Growth
A Short Course in Economics
Addendum to a Short Course in Economics
The Indivisibility of Economic and Social Liberty
The Price of Government
The Fed and Business Cycles
The Price of Government Redux
The Mega-Depression
Ricardian Equivalence Reconsidered
The Real Burden of Government
Toward a Risk-Free Economy
The Rahn Curve at Work
How the Great Depression Ended
Microeconomics and Macroeconomics
The Illusion of Prosperity and Stability
Experts and the Economy
We’re from the Government and We’re Here to Help You
Estimating the Rahn Curve: Or, How Government Inhibits Economic Growth
Our Enemy, the State
Competition Shouldn’t Be a Dirty Word
The Stagnation Thesis
The Evil That Is Done with Good Intentions
Money, Credit, and Economic Fluctuations