Say… Cheese

I’m still trying to unpack Bill Black’s 3 part (of two) criticism of Mankiw, but fortunately I studied Samuelson and Nordhaus who at least pay lip service to the seminal macroeconomic insights of Keynes.

One of the concepts Keynes explores is that what is rational and logical behavior from a micro-economic standpoint can be profoundly counter productive.

Take the case of Cheese.

We are experiencing a cheese glut, 3 extra pounds for every man, woman, and child. Even if we gave it away to the 795 Million people who according to the United Nations World Food Program “don’t have enough food” that would be one and a half pounds apiece.

Now the micro-economic solution to this problem is milk more cows at higher efficiency and lower cost (effectively the same thing my Department of Redundant Redundancy tells me) but since every rational and logical dairy farmer will do this to the extent of their individual capability it will simply increase Supply in the face of Demand that is either fixed (as it turns out nobody wants more cheese, even if they could get it for free) or slower reacting (I suppose I could wear shoes made out of cheese except that my toes would stink of Limburger, not that they don’t already) than Supply.

Welcome to counter intuitive Macro World!

If you wish to minimize economic disruption, you know, avoiding rotting cow carcasses on the side of the road where you can see them through the windows of your Mercedes not to mention the grifting former farmer hitchhikers who couldn’t fit their Okey worldly possessions in the boot of your SLK 350 (it’s meant for A Golf Bag dammit) and their 27 snotty brats in the shotgun seat, what you need to do is create artificial Demand through Government action.

Keynes actually did suggest paying people to bury jars of money and letting private interests pay other people to dig them up. It’s not the most productive use of purchasing power in that it creates nothing of lasting value and has a very low multiplier effect, but it certainly serves a wealth transfer function from those inclined to hoard and benefit from disinflation which rewards holding cash instead of investing it in productive enterprises. Dave Schilling has several suggestions in his piece- dump the cheese in the ocean, bake the world’s largest pizza, erect cheese sculptures in every city, shoot it all into the sun with a rocket, put it on the moon.

In fact we address this problem, at least in regard to agricultural commodities, with a very Keynesian solution, we set a floor price based on the cost of production and make the Government the consumer of last resort.

This is different from a $15 Minimum wage how? Oh yes, hard working White Homesteaders not lazy Brown Cadillac Queens. I see more Mercedes parked next to farm houses than I do in the Bronx.

Whatever we do, though, let’s make sure we don’t give it all away to someone who needs it. That would be un-American.