We would be less advanced technologically advanced without the government subsidizing research and development. And during war there is the greatest growth in technology. A historical example of this would be WW2. As a result of the Second World War, we have jet engines, rockets and nuclear power.
Mises community, what is your response?
A lot of times subsidized R&D causes technology to stagnate because it makes one and only one branch of research (government research) more profitable than any other. An example of this would be the lack of research done on solar panels and fuel efficient cars because of subsidized R&D in other enviromental technologies (I forgot which ones really) that turned out to be not as efficient at removing waste.
I find it funny that so many people criticize Austrians for being obsessed with gold when they seem to have some attachment to techonology beyond it’s use in helping individuals attain their ends.
In any case, the government can’t invest. Investing means deferred consumption, as the government spends the money without the intention of increased future consumption. As such, all spending by the state is consumption.
In any case, the government has no way of knowing whether or not it should be spending it’s money in a certain area. It lacks the price system, as a monopolist there is no bidding between the state and private individuals for factors of production, this means that there is essentially no way for the government to know whether or not it is making a loss, since it is impossible to compare different resources. As a monopolist the state can’t tell whether or not it is satisfying consumers demand, it draws its resources directly from the taxpayers through force. It needn’t pass the market test of whether or not it is beneficial, the price system.
As such as government “investment” is arbitrary, based on the whim of a central planner or whichever defence contractor has the most political power.
Perhaps the war did lead toa few new inventions, a new way of building ships for cheaper. This can only be seen as “good” in a purely technological sense, if people really did value it highly then the state wouldn’t have needed to intervene. The Nazis came up with a few new ways to exterminate people in vast quantities, according to this argument that would have to be a good thing. And if it is then why not wage perpetual war?
It is impossible to predict the technological path that history would have taken without government intrevention. We would have airship that transport large amount of cargo for all we know. Or we could have an electromechanical version of the internet(completed with punchcards!) that eventually drive the development of modern computers.
Who know? Fill free to fill your alternative history speculation here…
It’s not relevant. We could still be without TV, internet etc. without the state intevening in the economy. We’d be better off nonetheless.
What does this topic have to do with gold? I never critisized Austrians for allegedly being obsessed with gold.
It seems pretty obvious that technology, by definition, only has value in helping individuals attain their ends.
This is true. It does obtain its revenue through compulsion.
I’m not so sure about this. Once the government collects taxes, it goes out and purchase factors of production on the market. It directly competes with private individuals in this respect. And it seems possible for the government to compare the cost of alternative projects it can embark on. I don’t see how the government is a monpolist in the production of technology.
Maybe. Maybe not.
People do value jet engines and the internet. And they both owe their existance to military investment. And the ability to exterminate was prabably a good thing from the National Socialist’s point of view. But I never argued that was a good thing. Nor is it inherent in the original argument that government investment is needed to encourage technological development.
Didn’t the internet develop out of the arpanet, which was a United States Defence Department project initiated during the cold war?
Nor did I ever say you did.
That’s not true. In a society of individuals who wished to live a very traditional lifestyle without technology if one individual came along and forced them to hand over their cash so he could make improved TVs to help them, he would be the one benefitting.
For a starters, government taxation in and of itself distorts the market price system. It is impossible for the government to develop an equal tax whereby all areas of the economy are equally effected. To do so the government would have to create a market rate of taxation, which is impossible since taxation and the free market are not compatible.
If government establishes itself a monopoly in an industry it will have nobody to bid against for the specific factors of production, therefore economic calculation is impossible. How can anybody add up factors of prodction x, y and z and then compare with the price they sold it for? They can’t.
Now if the government doesn’t have a monopoly then it will outcompete all of it’s competitors, because the state enteprise is funded by taxes it can charge a lower price and pay a higher price for factors of production. Even without a monopoly the price system is largely distorted. In the former Soviet Union for example the state had a monopoly in every industry, there was calculational chaos, yet this was when they could rely on outside prices. In other words the price system wasn’t completely eliminated, likewise for the example we’re discussing
In that case no government intervention is needed.
As I said earlier, it’s not correct to call it investment, and it doesn’t follow that because jet planes and the internet were created by the coercion that they can only be created by coercion.
Then what’s your point?
He is also an individual and values the improved TVs.
It does not abolish the price system and can still use the prices to compare alternative projects.
If the government monopolizes the production of, let us say, armoured vehicles, it only establishes a monopoly in that field. Factors of production, such as steel and rubber must still be bid away from other producers in the market place. Also, governments can then turn around and sell the tanks to other countries. So it is possible for a government to compare prices.
But governments were responsible for their development.
That’s true. But maybe they wouldn’t have been.
Sorry. I should have worded this better. It is true that government is not the only producer of technology. They are not needed to create it. But, they may be more efficient at doing so. After all, the government subsidizes R&D. This is a function that they perform. We wouldn’t have the same nuclear power or jet engines or rocket technology that we do now without government investment in these fields.
Stalin is also an individual and values ruling over massive populations, even if it kills them.
Yeah, it can use prices external to it to try and navigate.
Nope. It isn’t. A monopoly has no way of knowing whether it is putting resources to their optimal use internally. The same would apply to a massive cartel of firms. They would suffer from calculational chaos. They could rely on outside prices, but internally they’d be stuck with arbitrary pricing. The government, being secure in its income, has no way of knowing whether it is satisfying consumers via the profit-and-loss mechanism. It simply extorts the funds then uses them to satisfy its own preferences.
And?
Why? Why assume this? The market is what brings various technologies to consumers, not the useless, slow government. It may come up with technologies for its own ends, but at what expense? How can it possibly know if it’s efficient or not?
How does it know whether the money it extorted could’ve been put to more optimal uses in private hands? So what if it “subsidizes” it? It also subsidizes food production in some countries.
And we wouldn’t have had devastating wars, technology used by the government to spy on individuals at every minute of the day &c. Besides being utterly unprovable (how do you know this?), the statement is meaningless in light of consumer preferences. If consumers want technology, they’re free to save or donate to scientific foundations or in their capacity as entrepreneurs invent. If they do not, that is the end of it. Trying to force technology down their throats because it’s “good” for them is just the government prioritizing its own preferences over theirs. Why should I care what it wants? And why should I believe it can allocate funds efficiently here when it cannot even run a farm properly? Ridiculous.
Yes, that is true. And in regards to economics we can go no further than to say his actions have led to a decrease in utility, in the cardinal sense.
But the prices don’t reflect reality, that’s the problem. Like I said, the USSR didn’t entirely abolish prices either, yet there was economic chaos. it’s difficult to argue with that fact. Ultimately, these new prices don’t accurately reflect consumers preferences.
Yes, the government can compare prices. You’re ignoring the fact that these prices will be distorted. They won’t reflect reality the way prices in a free market do. As the government is funded by taxation it will be able to offer lower prices for certain factors of production than privately owned enterprises. This means that first off all there won’t be a market for factors specific to the making of tanks (say, a certain type of metal or something, I don’t know).
And? This doesn’t make it good.
Which only makes the fact that government produced it worse.
Which only shows society doesn’t value it. In which case there’s no justification for government forcing peoples money from them to pay for it.
lol. nice.
I concede this point.
In this case it would only be a monopoly nationally. It would not have an international monopoly. So there would still be prices and calculation would be possible. And firms would only be internally chaotic if they are integrated multi-stage firms and there are no markets for intermediate stages.
Ok, you’re right. Can you give me some good examples of market produced technologies?
This is good stuff. Do you mind if I tone down the forceful language a little bit and use these arguments. And also, what government run farms are you refering to? Can I get a source? Oh, and do you have some examples of government technology that’s been a huge expensive waste?
You mean an increase in utility for him and a decrease in utility for the other party. and in the ordinal sense.
There is a difference. In the USSR, the prices which were used were international prices, which reflected the preferences of international consumers but not soviet consumers. In the situation were there is partial expropriation, the prices reflect the preferences of net tax recipiants and to the extent that they are sold on international markets, the preferences of foreign consumers.
No I’m not. I’m just saying that calculation is not impossible in this case.
Agreed.
Which would be in accordance with the preferences of tax consumers as an aggregate but not all consumers in society as an aggregate.
If the factor is specific, there is no alternative and no opportunity cost to calculate.
Can’t really disagree.
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Well one only needs to take a look at the government’s military budget to see some of the largest waste in history when it comes to new technology in killing people.
You’re correct, sorry.
Not entirely no. But that doesn’t mean government will be able to rationally allocate resources.
Sorry, I may have worded it incorrectly. My point is that without an external market for them there will be certain factors of production of which the price will be unknown. Hence, it will be impossible to rationally calculate whether or not they are satisfying the demands of the consumers?
The same thing applies here though.
Thank you.
The point is that it does not have to care whether it pleases its consumers or not. It is not subject to the profit motive, in addition to being vertically integrated in some cases (though it can by pass this problem by outsourcing work to firms on the market… but this does not solve the former problem.)
Most technologies from the Industrial Revolution were privately funded, e.g. the lightbulb and the telephone. And as for one fomented by the government… see this. Most sources on this are in books, so I’ll mention this one and this one. The latter documents great industrial innovators. This article is good on briefly summarizing the basics of the topic. And on problems with government involvement with science, see this and this.
I mean the USSR/China and other countries which took direct control over agriculture. Their history is well documented in this regard, so I’ll just link to an article. The US intervenes by way of subsidization. It’s still destructive. NASA has been a mixed bag with regard to waste. A lot of its programmes have generated massive failures. Here’s an article on it. Most of the time, innovation to do with government technologies comes from private firms, which discover how to put it to use in accord with consumer preferences. Firms like Virgin and Google are completely surpassing the government in moving funds to technologies that now interest the market, e.g. Virgin’s owner attempting to make space travel affordable. Some technologies might not have existed at all. Japan is a good example of a country where subsidization looms large, and has not had the results it was anticipated it’d have. I’ll post an article on that later, if I can find it. What is this for, if I might ask?
I didn’t say it properly. What I meant is that there is no alternative line of production for a specific factor and therefore no opportunity cost, and therefore no need for calculation. And yes, without an external market, there is no way to calculate. But even when the government monopolizes an industry, it only does so within it’s territory, so there can still be external international markets for the products produced as well as the factors of production.
Agreed.
Thank you. And this is for creating an argument for someone who strongly feels that government subsidization is needed for R&D and who doesn’t know anything about economics. I thought it might be a good idea if I created a new ID and just threw the argument out there like a newbie and see what ppl’s response was to it. I’ve noticed in the past that when ppl come on to the forum and say, “I need help with this”, the quality of response is much lower. And it was fun to get into an argument over calculation, which is a bit more of a grey area in AE than most of us will admit. Anyway, please do post later. And I’ve also been reading Rothbard’s “Science, Technology, and Government.”
Tibor Machan has a book called Science in a Free Society or something to that effect. I haven’t read it but it’s worth checking out.