Tuesday, 2 July 2013

Helicopter Money and Stone-Age Banking

By Anthony de Jasay

Teaching aids can be treacherous instruments. Images, metaphors and little tales, addressed to all and by no means only to children, are designed to convey some truth in an easy to grasp and hard to forget. Some of these aids however, also contain half-truths and falsehoods. Worse still, some of them do this by design, deliberately implanting lies in people's minds. They are easier to plant than to eradicate once they have taken root.


A classic example is the representation of the national product as society's "cake". Some good fairy flies in overnight, deposits the cake on the communal table, ready for "society" to slice it and hand out the slices to its members. The next step is unsaid, but suggested almost irresistibly: everyone is entitled to the same size of slice as everyone else. Unequal shares would be "socially unjust"—which it presumably would be if the cake really fell from heaven, unaided by human hand. Once it waits on the table, ready to be sliced, it is all too easy too ignore that human hands had first to bake it.

Helicopter money is a less insidious, but no less misleading example of the wrong sort of teaching aid. When the economy is producing at less than a comfortable rate, with capacity utilisation at less than 90 and unemployment at more than 5 or 6 per cent, it stands to reason that easy remedies must be available to put this right and only a government of retarded half-wits will fail to reach for one. It needs nothing more clever and complicated than using helicopter money.

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