The Fallacy of Economic Catastrophism

UPDATED!-See bonus thread in the comments to address comments from RJ

There is a certain very pessimistic idea out there that Israeli chareidim, who are generally poor and rely on government support, will eventually cause the economic collapse of the entire country. This is because, as the idea goes, as they increase in proportion to the rest of the “productive” population, their subsidies will eventually consume all the money in the country. As one of these sad and gloomy prophets declares:

On a societal level, it’s even worse. By the time the charedi leadership accepts that they have to change their way of lie, it will be too late. First, because this realization will only happen when they are either incapable of using their political strength to extract money from the rest of the country, or when there is nothing left to extract. The former may well not happen before the latter. Secular Israelis are not going to hang around while a government that needs charedi support is continually raising taxes from non-charedim in order to support the growing charedi population.

Second, even if the charedi leadership eventually does accept that change is necessary, it’s not something that can happen overnight. After convincing people for decades that secular education is treif and work is to be avoided, you can’t suddenly convince them otherwise. And even when you do convince them, it will only help them change things for the next generation. There is a lag of thirty years, after the money has run out.

The author of this piece obviously has no comprehension of the basics of finance and economics. Forget about GDP growth rates, duration, convexity, supply and demand, opportunity cost, PV, APV, put-call parity, elasticity, etc.- he doesn’t even understand simple arithmetic. There are a whole bunch of strawmen and simple fallacies in the two paragraphs I quoted, but the most striking ones are that the author imagines

1. The money runs out suddenly rather than gradually, in a way that people perceive. This is obviously an extremely childish way to think, and doesn’t happen in the real world. UNLESS…somebody (=the government) deliberately cuts it off suddenly- which is extraordinarily unlikely, and even if it happened, would mainly affect the chareidim, and the fears of general economic collapse due to this are baseless.

2. As chareidim increase in proportion to the rest of society and and the subsidies dry up, they won’t change their behavior in response to their changing circumstances. This is akin to thinking that because the home healthcare market is growing very quickly, and continues attracting workers to the industry at a swift rate, it will continue to grow until it is too late and consumes 100% of the economy and absolutely everybody is working in home healthcare and we all starve. In other words, insane and/or infantile. Chareidim will adapt to external circumstances, just like any other society in flux, and just like they have done in many other respects to survive (but not necessarily in the way secularists would like). The 30 years figure he gives for societal change (AFTER the money “runs out” 😂- see #1) is complete nonsense he pulled from his hat on the fly, absolutely disconnected from the real world.

The actual experts, when they are not coming from an ideologically anti-chareidi/religious perspective, such as the past governor of the Bank of Israel, do not maintain such foolish worries, but rather the legitimate concern (from a secular economic point of view) that as the chareidi portion of the population grows, with its inferior job skills, GDP growth will slow- to the level of Japan. None of this apocalyptic gobbledygook that I mentioned before. Is she right? Who knows. As somebody wise once said: “God created economists to make astrologers look good”. It is true that chareidim are not as interested in secular knowledge as their secularist counterparts, for good reasons, and that is not likely to change completely. They will probably advance a different sort of economy than the one that presently exists. This is a development that as Torah Jews, we should welcome. There is a book called “כשהחרדים יהיו רוב” which discusses this wonderful prospect, and arrives at a similar conclusion. May we all merit to see this future, and the coming of משיח צדקינו, אמן.