Thursday, 21 February 2019

You can't build a bridge in 2019 using steel produced in 2029.

It's very unusual for Simon Wren-Lewis to make a mistake, which is why I have followed his blog for several years. Plus I am going to nominate him for a gong (whether he likes it or not).

However in his para starting "The argument that..." he falls for the popular myth that if something is funded via debt, future generations have to pay, in that they have to repay the debt. That idea doesn't just break the laws of economics: it breaks the laws of physics. To illustrate, if a bridge is built in 2019, the blood sweat and tears needed to build the bridge and the steel and concrete used in its construction absolutely have to be sacrified in 2019 or earlier. That is, it is not physically possible to build a bridge in 2019 using steel produced in 2029. Doing the latter involves time travel.

The only exception to the above comes where something is funded with money loaned by a foreign country (as pointed out by Richard Musgrave (no relation) in the American Economic Review in 1939. But since every country faces the same problem as to how to fund green forms of energy production, the above “foreign country” point is of little relevance.

Also Nick Rowe claims to have a complicated method of avoiding the above “physical impossibility” point. I’ve never been much impressed by that, and for reasons explained in articles on this blog a year or two ago. To find them, Google something like “Ralphonomics” “Nick Rowe” “time travel”.

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