Krugman Blog- Coalmines and Aliens

August 24, 2011, 5:20 PM
By the way, nobody seems to have noticed that my suggestion that a fake alien threat would end the slump was nothing more than an updated version of Keynes’s “coalmine” thought experiment:

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.


Keynes then goes on to explain that the actual business of gold mining — in which basically useless ore is mined and refined at great cost, then sent to sit idle in the basements of central banks — is for all practical purposes identical to his coalmine idea.

He was right then, and I’m right now — and if you find it strains your personal credulity, so what?

http://krugman.blogs.nytimes.com/2011/08/24/coalmines-and-aliens/