The Savings Monster
VICTOR A. CANTO AND ARTHUR B. LAFFER
Teratology, if we are to translate the ancient Greek literally, is the study of monsters. In practice, it is more concerned with biological deformities than with any real or imagined monsters. Teratology focuses on an individual in a species with some bodily part missing or some extra part, or a part greatly mutated. Atavistic genetic alterations often seem to be the source of the mutation. The contribution of teratology has been to show how minuscule deviations in chromosomal genetic timing can really have profound implications on the adult life form that results.
A similar phenomenon exists in economics. Archaic concepts long submerged get resurrected time and again only to flourish in the minds of academic scribblers until they fall into the hands of tradesmen. The resultant failure condemns the concept to a nether world until memories, once again sufficiently dimmed, allow its resurgence. Natural selection at its best.
John Maynard Keynes, along with other top academics of his time, faced an incredible intellectual dilemma. How on earth could society create the conditions of seemingly interminable unemployment on a global scale? The Great Depression had been to mainstream academic thought what Steve Garvey is to planned parenthood. A new view just had to be found.
Fortunately for Keynes, there existed an underconsumption theory that fit his needs precisely--an antiquated, discredited view of the world that stressed secular unemployment. The theory of underconsumption had long kicked around in the backwash of mainstream economics and had never flourished before Keynes