… is from page 40 of the late Harvard and AEI economist Gottfried Haberler’s 1974 book, Economic Growth & Stability: An Analysis of Economic Change and Policies:
In a dynamic, growing economy, where new methods of production and new products are continuously introduced by innovating entrepreneurs, “frictional” and “structural” types of instability and unemployment cannot be removed by monetary and fiscal policy. They are the price a people pay for progress. They could be eliminated only by preventing progress and growth itself.
DBx: Yes, and two further thoughts.
First, equally futile and foolish is the attempt to use monetary and fiscal policy to avoid the very real economic damage inflicted by lockdowns. Even if you believe that the benefits of the lockdowns were greater than their costs, those costs are quite real. Those costs can, perhaps, be masked for a while, but they cannot be eliminated or even much reduced, by monetary- or fiscal-policy maneuvers.
Second, to avoid the instability and unemployment mentioned above by Haberler would require not merely stopping economic growth; it would require tolerating ever-deepening impoverishment. The reason is that even simply to maintain the existing level of prosperity requires that entrepreneurs be free to explore for substitute ways to produce goods and services, given that currently used inputs will steadily decrease in supply (and, hence, rise in cost) if innovation in producing and sourcing is quashed. Such innovation, in turn, will destroy particular jobs. A steady-state economy (as depicted stylistically above) with no destruction of particular jobs and businesses, and one with no frustration of plans and disappointments of economic expectations, is literally impossible.
