It’s a good point to bring up. There’s absolutely no reason for you to continue to straw man and create false dichotomies. Well, that’s not true. The reason is that you are dishonest.
Aschaur (among others) noted that decreased public investment over past decades resulted in a decline in the infrastructure stock. Very little of this decreased investment was apparently made up by increased contribution from private sources.
One can also look at particular programs, such as the interstate highway system in the 1950s. If one wants to go back in history to the point where most infrastructure was privately owned in the US, it’s possible to see the effect of public programs on the infrastructure stock as well.
http://www.iga.ucdavis.edu/Research/All-UC/Lee.pdf/at_download/file
Thus?
Eh? Comparing two different things? Estimated capital? I won’t argue with you that building roads may have a positive effect. But what is the opportunity cost? Of all the projects that may have been initiated, was that the best choice or even a better choice? How will we ever get this information until roads are privatized? Also, I’m surprised that you’re actually defending the national highway project which essentially corporatism on a mass-scale for militarist pretexts.
Before public rural infrastructure, roads where privately maintained. That was my purpose in posting that particular study. As for the opportunity cost, that was mentioned on page four.
None of these studies calculate returns in the way you suggest that they do. Generally, using lags or GMM, they correlate changes in public outlays with changes in output. They don’t factor out the cost of funding the roads or do anything that would disregard opportunity costs or ignore negative output multipliers of infrastructure finances.
Everything the government does is corporatism on a mass scale for militarist prextexts. However, interstate highways did not exist on the scale they do today before public programs.
edit: And to answer the question, “what opportunity cost did interstate highways impose on the economy?” Not enough of one. Another study incoming.
Oh, and I recently received this email:
Did Rufus just say I’m going to George Clooney’s house! Egads!
How would you know what other uses of resources are more beneficial by making empirical observations? The most sure attribute of the thing you didn’t get is that you don’t know how beneficial it would have been. Empiric comparisons can’t tell us that, because we never know what would have happened if we had gotten the thing we didn’t get.
You keep saying that state infrastructure spending causes a net raise in output. But again, that does not account for how much output could have been raised by the private market spending those resources. Only prices can discern opportunity costs, but the state doesn’t operate within the pricing system. That the state is blind to opportunity costs does not mean that they don’t exist. That’s what the communists attempted; to exclude production from the pricing system in order to make opportunity costs disappear. It seems you want to attempt the same economic magic trick, just limited to infrastructure.
Student, is that you? Why are you posting under a different username?
Yep, we’ve been telling him this for a while. He keeps trying to blow past it becauase, well, he’s a troll. Just look at his avatar.
Market actors are not infallible either, they make mistakes like everyone else.
We can’t really know if the opportunity cost for building a highway outweighs the potential gains in productivity.
We do know that one dollar can’t be spent twice. So these decisions matter.
The question is: how big of a risk are government actors willing to take? How bad do you want a highway?
EDIT: Also I’ve been meaning to read the case law involving corporate personhood as it relates to Citizen’s United but I’ve been playing Tera so I really don’t have a solid enough understanding of it to comment on it just yet. The Citizen’s United ruling cites First National Bank of Boston v Bellotti and the NAACP v Button as the major grounds for the ruling but I haven’t actually read them so yeah.
As far as the intended scope of the first amendment right to free speech I really don’t know if the Founders ever intended entire corporations of people to have the same protections as individuals though it makes no sense to me that a group of men would lose their rights to free speech just because they’re in a group.
I guess he actually believes it, but nothing we say really matters, because that’s just deductive economic theory. It’s sort of like “this empiric study says so, so it must be true, so why bother getting my hands dirty with economic theory”. If some study says it is so then it’s true by definition, and there’s no need to explain it theoretically and no need to address why economic theory would say otherwise.
Alright. Conclusive proof that all public projects everywhere should be defunded.
I really have no idea; I’m not a government official. In any case, I’ll reiterate one point. The studies correlate increases or decreases in public funding with increases or decreases in long run output. When public infrastructure is cut, and a 10 or 20 year lagged regression shows that output still falls, then that’s not very convincing evidence that private spending will some day make up the difference.
You might be assuming public infrastructure crowds out private spending. This isn’t necessarily the case.
I’m not sure what the authors of the constitution would think of the case. The party system didn’t exist back then like it did today. For what it’s worth, there were several concepts written into the constitution such as the commerce clause that seem to provide different rights to individuals and corporations.
Here’s what TJ had to say.
"“I hope that we shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.”
So I think we know his opinion at least.
The state not spending your money should really be the default position. Do you need proof that the state should not make you follow the right religion? Or that the state should not tell you who to marry? Why then would you need proof that it should not allocate resources for you?
Part of the reason why increases in government infrastructure spending correlate with economic output may be that the state has already monopolized infrastructure. So when the state doesn’t build roads, the free market can’t simply come in and do it. That of course means that more government spending leads to more growth.
That may be true in some cases, and privatization methods such as BOT are used often, but public support is critical for the instances we’ve looked at. Highways, rural roads and electrification, and so forth. Plus universal education, public healthcare (or lack thereof), and public science funding.
For the most part, I agree.
Public healthcare may be desired by a certain portion of the electorate but as the political proceedings leading up to the “Affordable Health Care Act” showed, single payer national healthcare is a very tough sell in Congress. Hell, they had a hard time getting the individual mandate through and it just might get struck down by the Supreme Court.
I personally think that if proponents of universal healthcare focused more on state-centered programs (think Romneycare in Mass.) that they’d have a much easier time getting the programs set up in states where a majority of the electorate looked favorably on public healthcare and then more conservative states could watch and see what happened.
It’ll be a while until the US gets universal healthcare. My guess is that it’ll happen in twenty years or so. But with Obama against it, it’s not looking likely. Romneycare isn’t really public healthcare, just steroid medicaid.
We don’t need more states doing it for an example, we have the entire rest of the industrialized world to look at. But in terms of results, Massachussets did see reduced emergency room visits, mortality, and hospitlizations from preventable conditions. I think fewer people dying and going without medical treatment would be a good thing.
K well at least it’s something and it doesn’t require the entire country to go along with it.
It is a good thing. I just have no real interest in it as of yet.
I’m sure there are plenty of states with electorates that would be all for it.
When a pasture is unowned and therefore free for anyone to graze on, it is ‘public’. When the state provides monopolized health care, that is not ‘public’. Don’t confuse public resources and state monopolies.
Ok, so roads, electrification, schooling, health care and science? Those are the ones the state can do better than the market. But not cars and grocery stores? Just as a conversation starter, could you explain why you think that the state is better at providing these but not everything else? Other than “because this study says so”. If you believe this then you must be able to explain through economic theory instead of just linking studies. Is there something about these goods that makes the state particularly efficient?
When I thought your argument was about infrastructure, I was giving you the benefit of the doubt that there’s maybe something more behind your argument. But now that you mentioned health care and schooling I know that you’re just a free lunch theorist, unaware of opportunity costs. Because there is no economically sound reason to support nationalized health care or schooling except the belief that free resources appear out of thin air when the state makes them “free”. It’s just confusing cost and price.
As for science spending, here the OECD found that government spending on science has no positive effect on economic growth, and in fact has a negative effect due to crowding out. Keep in mind that this is the OECD, they didn’t exactly want to find this. (They’re quite happy that everyone’s ignoring it.) Quoting The Sources of Economic Growth in OECD Countries, 2003: “The negative results for public R&D needs some qualification. Taken at face value they suggest publicly performed R&D crowds out resources that could be alternatively used by the private sector, including private R&D.”
What kind of outcome do you foresee in a situation where education, medicine, and transportation is monopolized by those who cannot be penalized for poor service? Where the answer to the problem is always more funding, coming from you of course, and rarely structural change. Don’t bother referring to Europe because they are at a cliff currently.
I think that to talk about whether or not the private sector can provide better healthcare ignores the very prescient political reality surrounding the healthcare debate.
My father is approaching his late 60’s. He spends thousands of dollars a month to pay for health insurance. He fears that in the event of some catastrophic event, he might be partially denied coverage or dropped altogether.
He does not care to determine whether or not current healthcare/insurance costs are a product of government intervention in the market. He does not care to explore the possibility that private providers, absent government regulations and price controls could perhaps bring him a better product. He worries that he won’t be able to afford his healthcare in a catastrophic event tomorrow. He is not alone in this fear. He always votes Democrat and he was very much in favor of the original single-payer proposal.
Fear of not being able to get afforable health care is what drives the effort to socialize healthcare. Anyone with half an interest in politics probably knows that programs like SS and Medicare are projected to implode within another twenty years or less unless they are drastically restructured but that doesn’t seem to stop anyone from asking for more safety net programs.
This is the political reality as I see it and it is devoid of any real economic reasoning. Please pardon my language but to quote Wesley Snipes from the movie Blade: “Some motherfuckers are always trying to ice skate uphill.”
I hear ya, but the idea of the market delivering goods isn’t an ends in of itself. It’s not some god to pray to. It’s a means to a better end. There are lots of things that put a floor underneath the price of insurance such as illegality across state-lines and mandates on certain things for insurance companies to cover (including ‘diseases’ which indirectly absorbs the costs of the prescription drug market). Privatizing hospitals that are currently state-owned helps also. I understand that your dad wants security. You can get insurance you just have to pay for it. The problem is that everyone has to pay for the same high rate which covers the fat sedentary cigarette inhaling gob of a person. If not now, when? I think it’ll take much less than 20 years for the Medicare/SS to implode. Just looking at the unfunded liabilities for the next decade, it’s more than our total national debt now by twofold.
The observed outcome is what matters. But prepare for a wall of text.
There’s no single explanation other than “failure to capture externalities”, but I can go into detail about particular sectors.
In the case of infrastructure and utilities, underinvestment occurs when private agents aren’t able to capture externalities, and so have insufficient incentive to invest. In many cases, it’s difficult to gather together all the possible future train-riders to raise capital for a train station. Other times, such as in the case of roadways, it’s impractical to set up toll booths at every intersection or onramp to charge people completely for services rendered in moving from one point to another along a road.
In terms of education, without some public subsidy, parents may neglect to invest in their children’s education. It makes pretty much everyone richer, smarter, and better off when the work force is educated and trained. There are also externalities involved in tertiary education which increase total factor productivity.
There are many perverse incentives involved in private healthcare when maximizing reimbursement is prioritized over saving lives. As a result, infant mortality rates and life expectancy are worse in countries with private healthcare.
R&D has a much higher social rate of return than a private one. Firms underinvest in R&D relative to a rate which maximizes disposable income because they don’t benefit from all the wider macroeconomic returns to innovation.
Most other parts of the economy don’t have these problems or untapped benefits on a scale that would make sense to involve the government.
I appreciate the citation.
The findings in the OECD study are a good argument against public R&D. Crowding out can potentially be significant enough to negate the benefits, both measured and unmeasured in GDP, of public science spending.
However, there are also additional studies on the topic covering more recent periods and accounting for cointegration which find positive returns to public R&D.
Considering the United States in particular, there appears to be a negative relation between cuts in public research and economic growth.
Not as much of a cliff as they would be on in terms of economic growth and public health if they privatized everything. As an aside, Sweden has one of the best credit ratings in Europe.
What kind of outcome? The increased economic growth already observed in the early and mid 20th century when these programs were introduced.
What Bloom has said about the unsustainability of current cost increases is true. The Republican budget calls for more medicaid spending than the Democratic one, though, so your uncle’s vote may be misplaced. Social Security is projected to level off to 5% of GDP several decades from now, which is, internationally speaking, not a very high amount of social security spending. The unfunded liabilities going out to 2050 sometimes mentioned are largely due to the fact that the federal government creates budgets in ten year intervals.
It’s worth noting that countries with public healthcare spend a good deal less on healthcare as a percentage of GDP than the United States does, and slightly more than the current US government expenediture on all its health programs, while experiencing slower cost growth. Universal healthcare could even improve the long run budget outlook by lowering costs.
Excess healthcare cost growth has gone since at least the 50s, and at the same pace before the major health programs. Baumol’s cost disease is a more likely explanation. Low productivity sectors such as healthcare tend to have their costs determined more by labor inputs than capital inputs.