Paul Krugman has proposed that if Martians were to attack we would spend to defend ourselves and this would move us out of the recession. This idea brings up two questions. First, suppose that the only way to kill the Martians is by mixing corn with salt water. Similar to the War of the Worlds, it might be the fumes from this combination that actually kills the Martians. Also suppose that this defense required eighty percent of the working age population to grow corn and throw it in the ocean. Then Krugman’s solution would be that the government would pay these people, unemployment would drop, people would have more money to spend and this would end the recession. The question here is “What do they spend it on?” Only 20 percent of the population is producing goods and services that everyone would want. The prices of these goods and services would increase dramatically. My guess is given that there would be so few goods available, the Obama administration would use some sort of rationing. Would our society now be better off than we currently are with our high unemployment? The answer is clearly no. Right now those who are working are producing goods and services that all consumers want and are willing to pay for. In the case of the Martian invasion, we would be producing defensive corn and not many goods and services would be available. So more people might be working, measured GDP might be higher, but consumers would be much worse off.
The second question is why are we defending ourselves from these Martians? Perhaps we are afraid that they will take away some of our freedoms. They might force us to work half of the year for them and then only let us have what we produce in the other half. To show that they are not evil, they may provide goods to those who do not work for free by taking them from workers. They might require children and grandchildren to be enslaved to them for several years to pay for all of the wonderful things they are currently providing us. They might make rules and regulations that limit our ability to engage in activities that harm no other individuals.
Come to think of it, if this is what the Martians are going to do, then Krugman is right – we should spend to defend ourselves. It might not bring us out of the recession but getting rid of these horrible rules would lead to greater long run growth. I wonder if Krugman would be in favor of us fighting for these freedoms?
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