Eco’s ‘How to eat ice cream’

A friend recently gifted me a vintage copy of some of Umberto Eco’s essays translated to English. One of the essays, titled “How to eat ice cream,” opened with an anecdote Eco said was based on his childhood. In the story, there was an ice cream vendor who sold regular cones for two cents and ice cream pie cones for four cents. Eco said his parents and grandmother would buy him which ever type he requested, but there was a limit. Young Eco envied the neighbor children who would parade down the street carrying a regular cone in each hand. But whenever he asked for four cents to buy two cones, the adults would flatly refuse and tell him that he could have a pie cone instead. As an adult, he mused:

[…] I realize that those dear and now departed elders were right. Two two-cent cones instead of one at four cents did not signify squandering, economically speaking, but symbolically they surely did. It was for this precise reason that I yearned for them: because two ice creams suggested excess. And this was precisely why they were denied me: because they looked indecent, an insult to poverty, a display of fictitious privilege, a boast of wealth. […] And parents who encouraged this weakness, appropriate to little parvenus, were bringing up their children in the foolish theatre of “I’d like to but I can’t.” They were preparing them to turn up at tourist-class check-in with a fake Gucci bag bought from a street peddler on the beach at Rimini.

The parenting method must have worked because he became Umberto Eco. What Eco recognized was that his parents had inoculated him against false consumerist behavior. The preventative measures were not against the so-called consumerist society but ostentatious display, the process of “keeping up with the Joneses.”

Around January 2018, there was a meme floating around social media. It said something along the lines of “Entrepreneur: someone who lives a few years the way most people won’t so that they can spend the rest of their lives living the way most people can’t.” I very belatedly discovered Carl Schramm’s 2004 book The Entrepreneurial Imperative. Schramm identified the 1950s as the time when American society ceased valorizing business ownership and virtuous risk in favor of material security. As part of the “security first” mentality, children and young people were openly discouraged from seeking independence or from being different in a positive way. The world was one of ossification and stagnation, even as the federal government and media pushed a strong Keynesian message of “consume to grow.” On a side note, now that I think about it, Keynesian economics resemble the children’s video game Snake: one guides the snake to food so that it will grow but eventually it becomes so big that it bites itself – Game over.

Even given the massive propaganda effort put into promoting Keynesian theories, scapegoating “consumerism” or “consumerist society” is a form of escapist thought, a dodging of responsibility. Eco spotted the cause and effect nature of being a parvenu. The desire for “fictitious privilege” creates a set of priorities that cause one to spend his wherewithal thoughtlessly. In turn a “boast of wealth” strategy leads to “’I’d like to but I can’t’” through ensuring that there is no money when real opportunity arrives. The world becomes one of abundant middle as the effort to possess everything spirals.

No, natural disasters are not good for the economy.

Every time there is a natural disaster old economic fallacies make their appearance. And they are usually always the same. In particular, the argument that a natural disaster is good for the economy. This should make little sense. Wealth is not created by destroying things. A natural disaster destroys wealth, doesn’t create it. I doubt anyone affected by a hurricane would argue that he is better off after the natural disaster than before.

The argument that an event such as a natural disaster is good for the economy rests in the positive impact seen in GDP (as is argued) after the natural event. If GDP increases, then the economy is doing better. But this is a misreading of GDP. This variable is a flow of wealth, it is not a stock of accumulated wealth. It is possible that wealth creation (flow) increases at the same time the stock of wealth is decreasing. And this is what happens during a natural disaster.

Imagine that someone’s house caught fire and burns down. Because of this situation, this person decides to start working extra hours to increase his income and be able to buy a new one. The extra hours makes his income (GDP) increase. But his situation is considerable worst because he lost his stock of wealth (remember Bastiat’s broken window fallacy…?). Arguing that a natural disaster (or a war, etc…) is good for the economy is like arguing that this person is better of because he has to work extra hours to recover his loss.

This is just another case of a too common fallacy in economics. We know that if the economy is doing better the result will be better GDP and unemployment indicators. But from observing a better GDP and unemployment indicators we cannot, and should not, conclude that the economy is doing better. More important than observing what is happening to GDP is understanding why is changing its behavior.

It could be argued that one of the problem of the Keynesian view of the world is the focus on what happens to output and unemployment rather than why these variables are moving. Not surprisingly, we get to the conclusion that going to war (or having a natural disaster) would be a good way to achieve full employment.

An update from Memphis (Russo-Baltic edition)

Dr Znamenski (bio, posts) sent me an email updating me on his recent shenanigans:

I also appreciate your remark that we need to reach out to other libertarian-leaning people rather than singing to only a libertarian chorus. Even though I am notorious for not contributing to NOL, I devoted this summer to reach out to liberty-minded people in Europe by going to St. Petersburg, Russia, and delivering there a public talk (in Russian) on “Heroics of the New Deal and Its Critics” at a downtown hotel and afterwards I met with the audience for a free-style interactive talk on current challenges to individual liberty. Then I proceeded to Tallinn, Estonia, where I met a group of Estonian libertarians and delivered a talk (in English) on geopolitical imagination of Russian nationalism (used current Alaska-related Russian patriotic rhetoric as an example). Then proceeded back to Russia, where at Samara University again I gave a talk on the mythology of FDR and New Deal Keynesianism and how it was appropriated in 2003-2008 by the Putin regime that was building the “vertical” of its power. My argument was that politico-economic regime whose “validity” was “scientifically” proven by Keynes in 1936 by now became a kind of a fetish that is associated with a good government. Hence, the “Heroics of the New Deal” title. The Estonian visit was especially pleasant and inspiring.

I also met an informal leader of Estonian libertarians […] Very productive and charismatic guy. I need to navigate him to you and to NOL, which will greatly benefit from his contributions (if any). His English is impeccable too. See his picture attached to this letter (they have Mises Institute of Estonia) in addition to a few other images from Estonia (the country where all paper work exists only in electronic form and a flat tax return occupies only one page!). The country [Estonia] was the first in Europe to introduce universal flat tax (1994), which replaced three tax rates on personal income and one on corporate profits. The flat tax rate was on 26%, which later was reduced to 20%. Several countries of Europe followed the suit and benefited from this. Very simple system, which helped this tiny backwater country of 1 million plus something people to dramatically raise its well-being. To their frustration, even Russian nationalists, who remain quite influential in Estonia due to the presence of a large Russian minority, have little economic discontent among Russians to chew on. The latter simply compare their economic situation in their historical homeland where average salary is $500 and Estonia where this salary is $1150.

Dr Znamenski has some excellent ideas brewing (on US-Russian relations in the Arctic, Crimean secession, and Foucault), and hopefully he can find the time to post them in the very near future. Notice, too, that Dr Znamenski refers to Russians as Europeans (or, at least, considers St Petersburg to be European). A small observation, I know, but one that I suspect has big sociological implications. Check out these pictures he sent me:

This is the Estonian libertarian Dr Znamenski mentions above. I hope to someday meet him.

This is a photo from the Museum of the 20th century in Tallinn (the capital city of Estonia).

This is my favorite picture. It’s a view of Tallinn with a curious visitor, and highlights Dr Znamenski’s sense of humor, which I greatly appreciate.

Around the Web

  1. Superior Mayan Engineering.
  2. Gary North: The Libertarian Taliban.
  3. How Much Does the Market Organization of Economic Life Matter?
  4. Margaret Thatcher’s Triumph.
  5. The Republic of Baseball.

From the Comments: Keynesian Economics and the Stimulus Bill

A recent brouhaha has erupted in the comments thread of Dr. Delacroix’s post on Obama’s bad economic policies. Now, to be sure, the bad economy cannot be put on Obama’s shoulders alone. All he did was sign the stimulus act into law, after all, and I doubt John McCain would have vetoed it.

Let us also not forget about the two foreign wars that George W. Bush charged to the republic’s credit card, either. With that being said, I thought another economic chart would do readers of this blog a favor. From AEI’s blog comes this:

Ta-dah! Utter economic failure.

(h/t Steve Horwitz)