Sunday, November 16, 2008

Bad Economics

I sent the following to the Raleigh News & Observer:
I know that it seems like common sense that the government should go on a spending spree now that consumers are becoming more frugal, but this is just bad economics even when it comes from a Nobel Laureate.

The "internal improvement" projects that are being called for must be paid for by taxpayers in some fashion. This will only crowd out private investment and prevent a more sustained recovery. Also, these projects will be allocated by the political process and not by consumer sovereignty. Without profit and loss considerations we will just be building bridges to anywhere.

We've just popped a bubble financed in part by private debt and irresponsibility. Let's not start another one with public debt that will burden the country for decades. Getting our houses in order, so to speak, both publicly and privately is needed now more than ever, even if it does mean short-term pain.


Brian T. Webb said...

There's a fine line with public works projects. An example, our interstate system, a project so large that social funding was a more efficient avenue (arguable).

So any public works projects on that scale (what could possibly approach it today?) may work.

I would argue that the size and control that government has attained in this new century makes any public works for the sake of the economy a scary prospect. It's just going to get fatter and more controlling.

William P. Dupre said...

How do you know that "social funding" of the interstate highway system was/is more efficient? In some cases it may be, but without profit and lose to guide economic decisions you just don't know, and resources get wasted that could have been put to better use.

See "What is seen and what is not seen."