Saturday, January 7, 2012

From the "Well Duh" Department

MIT economist states the blindingly obvious, that advances in engines have been used for weight and power and not for fuel efficiency. It's been observed in the industry for some time, and is almost a banality. What an economist should be doing with his time is looking at why this is so, and drawing the more important, and less obvious, generality, and that is that incremental advances or solutions do not happen by themselves, and in this social era, all incremental progress is then shoveled back into consumption. This implies that incrementalist policies will only be raided for some new luxury policy. For example, how the 1990's policies of austerity and deficit reduction led to the war in Iraq. The reality is that the government should always have a debt burden on it, precisely to prevent people from doing what we just did: thinking that a short term temporary nominal surplus – and yes that is the correct number of qualifiers – could be thrown at a policy with generational long costs and no incremental increase in production. But 2% ism is a technocratic mantra, and we couldn't have any truth in that particular bubble, now could we.