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Guest Post: The Cargo Cult Economy

Tyler Durden's picture


Submitted by Gregory Cummings via The Ludwig von Mises Institute of Canada,

Last week, I heard about a particularly tragic example of the post hoc, ergo propter hoc logical fallacy, which Frederic Bastiat, the great 19th-century economist, called “the greatest and most common fallacy in reasoning.”

After the outbreak of World War II, many isolated islands located in the Pacific Ocean became staging grounds for Japanese and Allied forces. This development unfolded before the primitive indigenous peoples, including those on the island of Tanna, Vanuatu. According to Wikipedia:

The vast amounts of military equipment and supplies that both sides air-dropped (or airlifted to airstrips) to troops on these islands meant drastic changes to the lifestyle of the islanders, many of whom had never seen outsiders before. Manufactured clothing, medicine, canned food, tents, weapons and other goods arrived in vast quantities for the soldiers, who often shared some of it with the islanders who were their guides and hosts.

Sadly, this arrangement came to an abrupt end with the end of the war, when the Allied forces abandoned these temporary airbases. Once again, the islanders no longer had access to the myriad of consumer goods provided by visitors from distant advanced economies.

As a result, on Tanna island and elsewhere, local inhabitants formed so-called “cargo cults” in order to restore their lost prosperity:

In an effort to get cargo to fall by parachute or land in planes or ships again, islanders imitated the same practices they had seen the soldiers, sailors, and airmen use. Cult behaviours usually involved mimicking the day to day activities and dress styles of US soldiers, such as performing parade ground drills with wooden or salvaged rifles. The islanders carved headphones from wood and wore them while sitting in fabricated control towers. They waved the landing signals while standing on the runways. They lit signal fires and torches to light up runways and lighthouses.


In a form of sympathetic magic, many built life-size replicas of aeroplanes out of straw and cut new military-style landing strips out of the jungle, hoping to attract more aeroplanes.

The indigenous peoples of Tanna island observed that material goods arrived after the presence of landing strips and aeroplanes. This led them to falsely conclude that material goods arrived because of the presence of landing strips and aeroplanes. They failed to consider other causal factors, such as the war, and based their conclusion solely on the order of events. This is the essence of the post hoc ergo propter hoc logical fallacy.

This error in reasoning persists today, particularly in the realm of economics as it relates to the role of government. For example, relative to a hundred years ago, it is obvious that our standard of living has drastically improved. P.J. O’Rourke illustrated this brilliantly by observing, “When you think of the good old days, think one word: dentistry.” Quite simply, we owe this increased prosperity to staggering improvements in marginal productivity and the division of labour brought about by capital accumulation and savings in a society based on voluntary exchange and a price system resulting from the ownership of justly-acquired private property. There is no other path to prosperity.

In spite of this knowledge, there remain numerous court intellectuals and their acolytes who serve as apologists for government, falsely insisting that since we are more prosperous after such and such regulation or such and such measure of taxation (other factors not being equal), we are more prosperous because of such and such regulation or such and such measure of taxation. Therefore, they conclude, more and more economic intervention is needed to cure our accumulating economic woes. And so it is, that the post hoc ergo propter hoc fallacy reasserts itself.

But insofar as our well-being is concerned, government intervention in the economy is no more effective than the straw aeroplanes and wooden headphones of some bewildered “cargo cult.” In truth, it probably does more harm.


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Mon, 12/02/2013 - 18:47 | Link to Comment knukles
knukles's picture

Government Intervention?

What government intervention?


The Illusions of Reality


And for all you people suffering from AIDS, good news.  A government directed cure is imminent.

Mon, 12/02/2013 - 18:56 | Link to Comment SafelyGraze
SafelyGraze's picture

just for the record, when prosperity follows on the heels of taxes and regulations, that does not meant that it *wasn't* caused by taxes and regulations

not to mention how prosperity followed on the heels of global war

and metal confiscation

and debt issuance

so how about at least considering the possibility that more taxes and regulation and global war and asset confiscation and debt issuance will, in fact, bring about great prosperity


ps. I may have left out genocide and forced sterilization and television as other contributors to prosperity.

pps mostly though, it was the creation of more debt. lots and lots more debt.

ppps and also global war. plus taxes and regulations. 

Mon, 12/02/2013 - 19:24 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

Prosperity for who?

Bernays wrote the book on instilling consumerism, and it has been a plague on mankind ever since.

Mon, 12/02/2013 - 19:34 | Link to Comment Bad Attitude
Bad Attitude's picture

Prosperity for who?

KoolAid drinkers.

Forward (over the cliff)!

Mon, 12/02/2013 - 19:48 | Link to Comment kaiserhoff
kaiserhoff's picture

Native Pacific Islander: Why do white men have so much cargo?

Beleaguered answer:  Because we have wives.

Tue, 12/03/2013 - 02:09 | Link to Comment Colonel Klink
Colonel Klink's picture

You're confusing cargo and baggage!

Mon, 12/02/2013 - 20:27 | Link to Comment manhattanexile
manhattanexile's picture

Remember, you didnt create that prosperity

Mon, 12/02/2013 - 19:34 | Link to Comment booboo
booboo's picture

Right, as I told my son today, if we had the same government mentality in the early 20th century as we do today we would have to start our cars by whipping it thrice with a buggy whip.

Tue, 12/03/2013 - 08:01 | Link to Comment Cloud9.5
Cloud9.5's picture

You have confused Ford with governent motors.

Mon, 12/02/2013 - 19:41 | Link to Comment max2205
max2205's picture

This is what the FSA will act like when the free shit spickott gets turned off...LMAO

Tue, 12/03/2013 - 10:30 | Link to Comment Sparkey
Sparkey's picture

What you don't want to recognize Max2055 is that you are part of the FSA as well, we all are, some are precieved as more vunerable, and, like you, we all like to abuse the vunerable,  still when the spigot closes you may not enjoy it as much as you anticipate!

Tue, 12/03/2013 - 13:20 | Link to Comment tahoe1780
tahoe1780's picture

Mostly CHEAP energy.  The U.S. was THE major oil producer.  U.S. oil ran the  Allies' war machine and, later, the machines of reconstruction.  Oil production in the U.S. peaked in the 1970's.

Mon, 12/02/2013 - 20:52 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

Build it and they will come!

Mon, 12/02/2013 - 22:48 | Link to Comment Moe Hamhead
Moe Hamhead's picture

Knuk-  Do you think he knows something we don't?

Like, he's got a case and he's worried?

Tue, 12/03/2013 - 06:43 | Link to Comment Ar-Pharazôn
Ar-Pharazôn's picture

uhhhmmmmm  let me think about it for a sec....


obomba want to cure aids? if it goes all well like obombacare we are all fucked.

Mon, 12/02/2013 - 18:46 | Link to Comment Al Huxley
Al Huxley's picture

I used to believe that correlation implied causation, then I took a course on it and now I don't have that belief anymore.  I think the course helped, but I'm not really sure...

Mon, 12/02/2013 - 22:44 | Link to Comment forwardho
forwardho's picture

That Sir is just plain good word play!


Mon, 12/02/2013 - 18:45 | Link to Comment NoWayJose
NoWayJose's picture

Will Wall Street bankers still look to the sky when Helicopter Ben stops dropping money?

Mon, 12/02/2013 - 19:09 | Link to Comment TrustWho
TrustWho's picture

Mother Yellen is a money will continue; thank-you very much. 

Tue, 12/03/2013 - 03:40 | Link to Comment HardlyZero
HardlyZero's picture

Loose slots !

Free Beer !

Zero Interest, Infinite Credit, Nothing Down !

The Whore of Babylon , or the final and 9th Gate (Circle).

Mon, 12/02/2013 - 18:50 | Link to Comment besnook
besnook's picture

kind of a bs analogy(the islanders thought/think the troops were sent by gods) but the past is prologue argument is a grand argument.

the current situation is the mistaken belief that if a variable in a model destabilizes the model then all that needs to done is an adjustment to the variable in question to restore stability without regard to reality. in other words, reality becomes the offending variable so reality must become unreal for the model to work which obviously destroys the model in the end in order to restore reality.

Mon, 12/02/2013 - 19:11 | Link to Comment Ralph Spoilsport
Ralph Spoilsport's picture

Sorta off topic - Remember Clutch Cargo?

Mon, 12/02/2013 - 20:27 | Link to Comment HerrDoktor
HerrDoktor's picture

How can you say this is off topic?  Spinner and Paddlefoot too!

Mon, 12/02/2013 - 20:46 | Link to Comment Ralph Spoilsport
Ralph Spoilsport's picture

Synchro-Vox at its finest. BTW, congrats on your 1 year anniversary.

Mon, 12/02/2013 - 22:43 | Link to Comment forwardho
forwardho's picture

I remember their creepy lips.


Mon, 12/02/2013 - 19:18 | Link to Comment Goldilocks
Mon, 12/02/2013 - 19:18 | Link to Comment Casserole of no...
Casserole of nonsense's picture

Watch a couple of episodes of Trashopolis and let me know how government rules and regulations haven't improved quality of life.

Mon, 12/02/2013 - 19:45 | Link to Comment booboo
booboo's picture

says the kid raised on disposable diapers, non returnable bottles, plastic shopping bags and McDonalds Big Mac containers.

Mon, 12/02/2013 - 19:27 | Link to Comment MrTouchdown
MrTouchdown's picture

I had no idea that Krugman was from Tanna, Vanuatu.

Mon, 12/02/2013 - 19:29 | Link to Comment Canoe in the Desert
Canoe in the Desert's picture

"Build it and they will come".

- Ed Koch, Former Mayor of New York

Commenting on public housing

Similar logic eh? 

Mon, 12/02/2013 - 19:34 | Link to Comment akak
akak's picture

I would love to see what the primitive cargo cultists would do with Bitcoin.

Oh, wait, we don't even have to guess:

Yap Bitcoins

Mon, 12/02/2013 - 20:49 | Link to Comment Ralph Spoilsport
Ralph Spoilsport's picture

At least they put holes in them to make them easier to carry.

Mon, 12/02/2013 - 19:40 | Link to Comment Being Free
Being Free's picture

I have Mrs Free standing out on the driveway waving two flashlights waiting for her Amazon order to arrive!

[edit] Does this make us cargo cultists?

Mon, 12/02/2013 - 20:39 | Link to Comment kaiserhoff
kaiserhoff's picture

No, but it will get the neighbors talking.

Mon, 12/02/2013 - 19:42 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

So, when the 99.9999% of WS that are corrupt psychopaths see the actions of the one moral soul working there, we should expect them to start emulating him/her?

There is no free market, never was, never will be.

There is only fear of punishment and lust for greed.  Build your systems accordingly

Mon, 12/02/2013 - 20:41 | Link to Comment RafterManFMJ
RafterManFMJ's picture

This Cargo Cult perfectly explains all those lines in the desert in S. America; clearly they were trying to entice the Alien visitors back but to no avail.

Mon, 12/02/2013 - 22:22 | Link to Comment JamesBond
JamesBond's picture

Our entire world history is based upon a grand cargo cult

-Erich von Daniken 




Mon, 12/02/2013 - 22:35 | Link to Comment carlin401
carlin401's picture

I talk often here of cargo-cults, but I think this 'plant' of an article is 100% fucking bullshit as always,


A 'cargo cult' has existed for 1,000's of years, for +10K year's man has had 'boats', and for 2,000+ years the Egyptians could sail into the wind, meaning they could go anywhere on earth, the Europeans always sailed downwind until the 1500's.


As long as there were ship's storms have washed these ships ashore, where the natives whether african's or polynesians came to believe that the shit that washed ashore came from god.

In time they developed religions around getting shit to wash ashore, including 'human sacrafice',

That the USA is a cargo-cult fuck yes, over 60% of the US public wait for the GUBMINT to deposit Bernanke-Bucks every month into their account.

'human sacrafice' fuck yes, over 100 million folks have been murdered to force the world to trade their food/oil for those bernanke bucks.


Tue, 12/03/2013 - 02:13 | Link to Comment StychoKiller
StychoKiller's picture

Obama gonna giv me a free painted-rock radio!

Tue, 12/03/2013 - 02:20 | Link to Comment knukles
knukles's picture

Gimme dat free obhama phone be yous or I busts yo head wit my painted obhama rock, yo muthafuckah

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