Wednesday, April 13, 2011

What the Hell Are They Smoking in Santa Monica?

For over 50 years, the RAND Corporation, a public policy and military strategy thinktank in Santa Monica, has given us a lot of cool things and a lot of not-so-cool things. On the cool side are things like the RAND Health Insurance Experiment, which is probably the most important piece of health policy research ever done, and Kenneth Arrow's Impossibility Theorem, which argues very persuasively that democracy doesn't work. On the not-so-cool side, it gave us the Cold War concept of mutually assured destruction, John Nash's arrest for public indecency in a Santa Monica bathroom, and this op-ed by Charles Wolf, Jr. in today's Wall Street Journal.

To judge by the quality of thought in this piece, Wolf, RAND's corporate chair in international economics, has been spending a little too much time at Chez Jay's. His argument is that, in absolute terms, the United States is not in decline. His evidence for this? U.S. GDP increased by 21% in real dollars over the last decade, its military spending increased 55% over that time, and the country's population has risen by 10% since 2000. So, you see, America is actually on the upswing, provided you confine the debate to GDP, military spending, and population size. Wolf's only real concession to the "decline" argument is in noting that U.S. GDP growth has paled relative to that of China. His conclusion? "Some numbers show inclines, some show declines and some numbers are mixed. What the numbers omit is as significant as what they convey. Omissions include the societal and systemic factors that stimulate or impede creativity, innovation, entrepreneurship and new ventures."

Um, no s**t. We personally find debates like this silly for exactly this reason: the concept of "national decline" is so vague that anyone can pick and choose a set of measures that support their assertion that a decline is taking place. How long have liberals been decrying falling school achievement and public-arts funding as a signal of America's downfall? And how long have pinhead economists been complaining about "income inequality" and the disappearance of the middle class as a sign of the same? Our point isn't that one side is right and the other is wrong: our point is that it's all bulls**t. Growth in government spending and currency manipulation by the Federal Reserve, rather than actual production, have been responsible for a good deal of GDP growth in the past decade, so we're not convinced it's a great indicator of progress. And what on earth does military spending tell us about whether our country is on the right track? Were the billions spent in the sands of Iraq and Afghanistan really a good thing? And finally, the population growth numbers are silly. What does the size of the population tell us about our economy? Can we really say we're doing well when the only contrasts are China (which has a one-child policy) and countries with populations that are aging even faster than ours, such as Japan and the EU countries.


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