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
This paper examines the effect of road infrastructure investment on aggregate output in the agricultural sector during the first decades of the 20th century in the United States. Two different panel sets using decennial agricultural census data covering the period 1900-1930 as well as data on improved roads published by the Bureau of Public Roads are created. Estimates of output elasticity with respect to improved roads are then calculated utilizing a trans-log production function. Preliminary empirical evidence shows that road capital had a positive effect on agricultural output for most states. Output elasticity estimates with respect to roads range from -0.05 to 0.11. The paper also finds that the rate of return on investment in road capital was higherthan the estimated rate of return to private farm capital in rural, largely agricultural states suggesting that road capital stock was below its optimal level in those states during this period.
mustang19: 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.
Thus?
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 This paper examines the effect of road infrastructure investment on aggregate output in the agricultural sector during the first decades of the 20th century in the United States. Two different panel sets using decennial agricultural census data covering the period 1900-1930 as well as data on improved roads published by the Bureau of Public Roads are created. Estimates of output elasticity with respect to improved roads are then calculated utilizing a trans-log production function. Preliminary empirical evidence shows that road capital had a positive effect on agricultural output for most states. Output elasticity estimates with respect to roads range from -0.05 to 0.11. The paper also finds that the rate of return on investment in road capital was higherthan the estimated rate of return to private farm capital in rural, largely agricultural states suggesting that road capital stock was below its optimal level in those states during this period.
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.
The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger
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.
http://books.google.com/books?id=1E60VLd5EFwC&pg=PA324&lpg=PA324&dq=interstate+highway+system+economic+growth+empirical&source=bl&ots=k0RSpjNCV_&sig=vbNN8cjoUMXKPUN92hEqli_vgIk&hl=en&sa=X&ei=jhSeT7f7KITg0QHu27mEDw&ved=0CHIQ6AEwCA#v=onepage&q=interstate%20highway%20system%20economic%20growth%20empirical&f=false
(Fernald) measures a rate of return of 100% before 1973 and a negative rate from 1973 to 1989. To put it in the words of Fernald (1999), "the interstate highway system was very productive, but a second one would not be."
Oh, and I recently received this email:
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Did Rufus just say I'm going to George Clooney's house! Egads!
mustang19:That some expense of resources is a net benefit does not imply that there arent other uses that are even more beneficial.Yes, which is why we do empirical research to see how marginal changes in public investment cause changes in output.
That some expense of resources is a net benefit does not imply that there arent other uses that are even more beneficial.
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.
mustang19:But let's not be too cynical. It's a sunny day outside. Finals are almost over. Usher just released a new album.
Student, is that you? Why are you posting under a different username?
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.
Voluntaryism Forum
EmperorNero: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.
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.
Autolykos: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.
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.
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.
mustang19:Alright. Conclusive proof that all public projects everywhere should be defunded.
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.
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 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.
That of course means that more government spending leads to more growth.
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.
mustang19:Romneycare isn't really public healthcare, just steroid medicaid.
K well at least it's something and it doesn't require the entire country to go along with it.
mustang19:I think fewer people dying and going without medical treatment would be a good thing.
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.
mustang19: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.
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."
mustang19: 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.
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."
bloomj31: 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.
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".
The observed outcome is what matters. But prepare for a wall of text.
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?
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.
He does not care to determine whether or not current healthcare/insurance costs are a product of government intervention in the market.
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.
Without logic, there can be no interpretation of any observed outcome. And as you have demonstrated on numerous occasions, you fail at logic.
I suppose you have never heard of investors before, huh?
I suggest you read this thread here and the accompanying articles.
I stopped caring to read the rest of your bs.
As with higher education, increased spending mainly covers tuition costs rather than increased inputs. Baumol's cost disease again.
I see that you don't read sources that are provided for you. Amusing.
I suppose the massive subsidizing of college has nothing to do with the rising costs? What about supply and demand? Hm? Oh, no, it's just the idea that because other industries cost more, therefore college must now cost more. Holy fucking hell, what a non sequitur.
No, not really.
I can present more papers.
Cost disease effects were no weaker before the HEA.
Perhaps the most important macroeconomic result is the operation of Baumol’s growth disease over the last half of the twentieth century. The hypothesis underlying the growth disease is that – because the composition of output has shifted away from industries with rapid productivity growth like manufacturing toward those with stagnant technologies like government, education, and construction – aggregate productivity growth has slowed. There has indeed been a tendency for changes in spending shares to slow economic growth. The growth disease has lowered annual aggregate productivity growth by slightly more than one-half percentage point over the last half century.
Yeah, it's quite the non sequitur. How is it that fewer farmers can sustain more people? The reason manufacturing is slowing is because government is harming the calculation in the economy. Manufacturing is not slowing because there are more teachers. If this were a consistent theory, we'd all be starving from a lack of food.
Manufacturing is not slowing because there are more teachers. If this were a consistent theory, we'd all be starving from a lack of food.
Actually, both manufacturing and agriculture have shrunk a lot over time relative to GDP while increasing in absolute size.
Anyway, even Cato skirts around the fact that there is no support for the thesis that student aid raises tuition costs.
In a 2003 NBER working paper, Michael Rizzo and Ronald Ehrenberg examined the responses of 91 public research universities to changes in state appropriations and federal financial assistance over the period 1979–1988. The authors were primarily concerned with the enrollment of out-of-state students as a revenue source.45 In the course of their study, they did not find that increases in Pell Grants led to increases in tuition at these universities. There are at least two caveats to this result. First, these flagship universities may behave differently from other colleges and universities, such as twoyear colleges or private four-year colleges. And second, it may be that the states are capturing the federal subsidy in the form of lowered appropriations by states for their major public universities.
So what?
And I'm sure the housing crisis had nothing to do with subsidizing the loan industry.
I don't like the FM's either.
mustang19: Manufacturing is not slowing because there are more teachers. If this were a consistent theory, we'd all be starving from a lack of food. Actually, both manufacturing and agriculture have shrunk a lot over time relative to GDP while increasing in absolute size. Anyway, even Cato skirts around the fact that there is no support for the thesis that student aid raises tuition costs. In a 2003 NBER working paper, Michael Rizzo and Ronald Ehrenberg examined the responses of 91 public research universities to changes in state appropriations and federal financial assistance over the period 1979–1988. The authors were primarily concerned with the enrollment of out-of-state students as a revenue source.45 In the course of their study, they did not find that increases in Pell Grants led to increases in tuition at these universities. There are at least two caveats to this result. First, these flagship universities may behave differently from other colleges and universities, such as twoyear colleges or private four-year colleges. And second, it may be that the states are capturing the federal subsidy in the form of lowered appropriations by states for their major public universities.
You might find these articles interesting:
http://www.zerohedge.com/news/january-consumer-credit-surges-government-blows-sudent-debt-bubble-epic-proportions
http://www.zerohedge.com/news/rosenberg-takes-student-loan-bubble-wagon-and-1937-38-collape-summarizes-big-picture
http://cnsnews.com/news/article/ed-secretary-federal-subsidies-college-tuition-do-not-increase-cost-tuition
http://www.zerohedge.com/news/did-jpmorgan-pop-student-loan-bubble
It's quite simple and I don't care what CATO has to say on the matter. Subsidize demand and prices increase.
mustang19: The observed outcome is what matters. But prepare for a wall of text.
I think the others have tried but I'll give it another shot:
In every instance of 'economic' reality/currentness, certain projects have been undertaken at the expense of projects never undertaken. If I built 1 Mansion, that's 3 small houses I could have but didn't make. If I made 6 rocking horses, that's 1 wagon I could have but didn't make. The observed outcome is not what matters because it is just one option out of many.
This is the problem with these public works. The market system is guided by the votes of consumers to allocate resources towards those ends which suit consumers the best. If consumers stop buying licorice sandwiches, well I guess it's not going to be profitable to make those licorice sandwiches and they're not going to be around anymore. When a public work is initiated, imagine if those funds used on the work were still divided among the people before they were taxed. Those funds would have been 'voted' directly through stocks or purchases, or indirectly through banks. One cannot tell if a public work was 'worth it' because there's no feedback loop. There's no communication between the producer and consumer of good/service. It is unverifiable that that project was the best possible allocation of resources.
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.
Like gotlucky says, investors. Risk can be split.
In many cases, it's difficult to gather together all the possible future train-riders to raise capital for a train station.
What? You mean like, get them on the train? Or perhaps your saying that there aren't enough riders to justify the project. Then it probably will cease to exist. That said, in countries that are not societally overinvested in the auto industry and highways (read: europe), tend to have a liking for trains and such. We don't because of the gargantuan highway system, another example of the state crowding out better projects. Given the american tendency towards cars and away from alternative transport, stemming from the consequences of infrastructure spending, trains and such are less feasible. It's also a huge country with lots of rural space where autos are more convenient so it's not totally fair to pin it 100% on the highways.
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.
Ever heard of EZ Pass?
In terms of education, without some public subsidy, parents may neglect to invest in their children's education.
Do they? Pretty sure that parents want their kids to succed, that is y'know unless they're using them as heads for welfare programs.
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.
Ah so opposing public school means opposing education? News to me. In fact I value education so much that I think it should be unmonopolized and subject to a process which doesn't tolerate incompetence. This does not mean excluding the poor. See here:
http://www.thefreemanonline.org/features/backing-the-wrong-horse-how-private-schools-are-good-for-the-poor/
Parents tend to value education, because they tend to care about their kids. Again, the market responds to these needs. It would not ignore the poor of society (which by the way in America are much richer than the poor in the article above). Public schools make it a stupid idea to send your kids to private school because you've already paid for the public one.
Evidence of this? How do you explain the mass prevalence of preventative measures? Which countries have 'private' healthcare?
Oh really? So lightbulbs, steel, phones, cars, vaccines, modern medicine, computers, internet are what then?
See: the last five pages of this thread.
So I suppose their debt just kinda popped up then? And it would have been much worse had everything been privatized because they would have devalued the currency to pay for their wasteful negative-returning projects? If sweden is so great why has there been no net job creation since 1950? Anyways I'm not very impressed by credit ratings seeing as UK and US are still AAA/AA+ despite having insane debt/GDP levels
http://www.zerohedge.com/news/psssst-france-here-why-you-may-want-cool-it-britain-bashing-uks-950-debt-gdp
http://mises.org/daily/4936
Once again. Broken window. Can you prove that the growth happened because of them or did it happen in spite of them?
I'm glad things worked out in Kenya. I'm not sure if the public schools there are more expensive to maintain or just funded less than private schools. Funding public schools while encouraging private efforts are not mutually exclusive. I'll take you up on this obscure topic.
What? You mean like, get them on the train?
The train has to exist first.
Not sure if EZ Pass detectors at every intersection would be much cheaper.
On public healthcare, there's the study I've already posted, plus this one. PHE, GHE, and THE represent public, private, and total health expenditure.
The fraction of total health expenditure through privately managed insurance was what 40 mattered the most in determining the healthy life expectancy and adult mortality for the OECD countries. Interestingly, the higher the fraction of total health consumption was channeled through private insurance, the higher the adult mortality and lower the healthy life expectancy was, and higher the per capita GHE, the higher HALE was. This suggests private insurance is less efficient than government managed health consumption a improving and maintaining the health of the general population per every dollar spent.
A lot of those innovations were either discovered at a public university (penicilin production), a public private partnership (semiconductors at Bell Labs), or by the government directly (DARPANET). Nokia, supported under Finnish industrial policy, is the largest and most internationally competitive cellphone maker. Probably could have picked better examples.
There's not been very much evidence posted in this thread that the majority of public investments yield a negative return. Even a negative marginal return doesn't necessarily indicate a negative average return. I.e., there's a difference between "the government is currently spending too much" and "there should be no government spending at all".
Some of the highest spending welfare states in the world run currently run balanced budgets. Government spending only creates deficits if not financed by taxes. I agree that there's too much put into some programs, and labor regulations in Sweden are terrible for employment, but an across the board cut to public investment isn't a good idea either.
I can't. That's only what the statistics show.
mustang19:There's not been very much evidence posted in this thread that the majority of public investments yield a negative return.
This thread has gone on for 5 pages and you still don't seem to understand Bastiat's parable of the broken window.
mustang19:I can't. That's only what the statistics show.
Hence correlation does not imply causation. Statistics can only show so much - which is our point. But even more importantly, they ignore at least half of the picture, as Bastiat points out in his parable of the broken window.
If you expect us to eventually stop bringing this up, you're dead wrong.
mustang19:But prepare for a wall of text.
I actually appreciate you getting into specifics this time. Now, apologies for this wall of text.
Could you do me a favor? Just as an intellectual exercise, while you are posting on this site, could you quit using the term "public"? The public is an abstraction and abstractions can't act, but he way you say it makes it sound as if "the public" is an acting being that does stuff. Only people act, which means that all "public" action is necessarily performed by some ruling class bureaucrat. It's not just about semantics, treating abstractions like people leads to all sorts of horrible generalizations and fallacies, including the belief that the state is an expression of societies collective will.
mustang19:There's no single explanation other than "failure to capture externalities", but I can go into detail about particular sectors.
Well, that's a more sophisticated argument than "hurr the government makes free stuff appear out of thin air" that we usually get from the left. I hope you agree then that no good or service will be any more abundant because it is provided by the state "for free", and you also won't fall back on that argument later.
In general, when meeting a problem like "failure to capture externalities", why do you immediately jump to the conclusion that we need to nationalize that chunk of the economy? A lot of the time when people like you talk about 'externalities' it sounds like they are trying to find an academic-sounding excuse for nationalization. The question should be how to capture externalities, not how to justify nationalization. I think a lot of these problems can be solved though by technology, others through developed financial markets, and others simply depend on better economic understanding.
Anyhow, even when we haven't exactly figured out how the market would fix it, we can be pretty sure that it would fix it somehow if we just let it work. So why is it that we always treat statism as the default position until we've shown that markets could work? We should keep in mind how much damage the state has done, even in the last century. It was, in fact, the leading cause of unnatural death. So why is it that people fear externalities so much that are unwilling to attempt a little too free markets?
mustang19: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.
You must be aware that there is such a thing as financial markets. People can borrow money. Indeed, if a project is beneficial to society, then entrepreneurs can expect a lot of revenue, and it will be no problem to find investors who want a slice of that. Who doubts that? I have even heard people on this forum argue that banks would naturally monopolize, because small bank couldn't stomach the cost of building as many ATM's a big bank. Really? They seem to be utterly unaware that there are other ways to finance business projects than the money in ones pocket. If a it is long term profitable to become a large bank, why would it be a problem to find investors who want to provide the money to start out large? In general, we can say this: If a project is the most valuable use of resources, then entrepreneurs can make a profit providing it, and then they can find investors who provide the funds in return for slice of the returns. If they can't make a profit, then there are more valuable uses of those resources and the project shouldn't happen.
Besides, why is it necessary to immediately jump to the conclusion that we should nationalize train stations? If it was impossible to fund projects like this in the market, couldn't there just be a government agency that hands out funds to people who show that their project would be underfunded because of market failure? Why does the state also need to run it too? This goes for healthcare as well.
mustang19: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.
This is a good example of where technology can solve the problem. I see no reason why tolls for private roads couldn't be charged automatically by computers without you even noticing, via cell phones or something like that. Then there's monthly fees, or insurance. All of this is very manageable in a free market, if we are willing to think about it for a while.
mustang19: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.
If parents neglect their childrens education, then they aren't doing well in government school either. If they are doing well, they would do even better in a liberalized system. Thus state schooling provides no benefit, it just monopolizes education in the hands of an expropriationary uncaring ruling class of uncaring, unaccountable bureaucrats. You wouldn't give your TV away to some stranger who's going to ruin it, but you will give away you child?
I for one think that forced state schooling actually keeps kids from learning by locking them up for decades. State schools couldn't really teach any less, the three R's only take about 100 hours to communicate, but the government manages to not get it done in a decade. I'm beginning to believe that state school is a stratification tool, i.e. the purpose is to keep the commoners locked up so they can't learn anything, and that way only children of the rich kan get a proper education. It makes us all worse off if people are kept dumb just so maintain hierarchy.
Not to mention that state schooling isn't about education, it's about conditioning. Monarchies invented it in the 19th century to create an obedient populace and maintain a heirarchical society, education was always an excuse.
As an aside, US primary education is actually a lot more centralized than in much of Europe. And it is a lot worse than in Europe. Especially places like Finland and Sweden, that leftists like to idolize, have actually privately run, yet publicly financed, schools. Yet for some reason people just pretend that US schools are free market and Swedish schools are socialist and interpret the failure of US schools as a failure of markets. Go figure.
mustang19:There are many perverse incentives involved in private healthcare when maximizing reimbursement is prioritized over saving lives.
Yes, private hospitals want to make money. That is not a problem, nor a reason to nationalize the entire industry. So do gas stations and buses. You can always find some anecdotal damage due to perverse incentives in free markets (you find it in every grocery store), but this is a small price to pay for the immense benefits of a for profit health care system that manages to efficiently allocate resources and create technological progress. Imagine we would have seen the progress we had in computers and cell phones in the last two decades in health care technology. We would be way better off than we are now, despite your doctor being a greedy jerk who just wants to give you the most expensive treatment you don't need.
Comparisons between countries can't tell us anything about how good health care would be in a free market, because the countries that don't produce progress can import those technologies and provide roughly the same health care as those that produced it. It's about not seeing the opportunity costs again, If all countries produced health care technology then humanity would way better off than if only a few with markets did and everyone compied their innovations.
mustang19:As a result, infant mortality rates and life expectancy are worse in countries with private healthcare.
Thank you for citing the infant mortality statistic! Because this one is actually based on a very easy statistical mistake. Infant mortality is defined as children that die more than a day after birth, otherwise it's stillbirth/abortion. Countries with private healthcare (I'm talking about the US in this case) manage to save more children, but that means they delay the death of many into that window where it is counted as infant mortality. In Europe they die before it is counted as infant mortality, hence a lower infant mortality rate. You can look this up, it's accurate.
I know this is just one statistic, there are plenty of other health statistics that supposedly show countries with national health care on top. (And many have similar explanations.) But you got to wonder why you believed this one even though it is refuted in two sentences. How come you were utterly convinced until now that the infant mortality rate shows national health care to be better? Were you told deliberate misinformation? Is everything you believe in that slanted? I just want you to think about the assumptions you're making, and not to trust everything you were told so blindly.
mustang19: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.
Which is a mistake, as Terence Kealey points out. It costs almost as much to copy an innovation as to make it, because you need scientists on staff who know enough in that particular field to understand what they're looking at. That means that it is very much profitable to make an innovation, because the creator can monopolize it for a while while others catch up. And by the time others have copied it society benefits because other producers deliver it too and there's competition and falling prices. So private markets in R&D actually couldn't work more perfectly.
Not to mention that government science is frequently a useless waste of resources, an not in any way economically useful. Companies develop stuff that people need, but governments fund science that backs up the latest authoritarian fad.Thats why government science is often even destructive, becuase scientists who are funded by the state have very perverse incentives. Which is why they come up with dangerous and destructive pseudoscientific fads like eugenics and climate change.
Also, innovation would be a lot more valuable if the state didn't artificially monopolize intellectual property and create barriers to entry everywhere. If everyone can just copy your product, it becomes a lot more valuable to make new inventions, because that's the only way to be competitive. You can try being a computer company that refuses to innovate, but I suspect you would go out of business.
mustang19: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.
Yeah, I guess there's a study saying everything. That's why empiric studies get us nowhere. We're bound to just pick the ones that happen to confirm our views. And governments are very keen on financing studies that justifies their existence. Not to mention that it is impossible to say anything about opportunity costs through empirical comparisons. It's like trying to guess how great it would have been if you had bought the other brand of ice cream by measuring how happy the guy who did buy that one is.
GMM, VAR, cointegration, and other techniques all use lags to determine causality. If it's obvious to you, it's probably obvious to the person who made the study.
"Public" is a precise and commonly understood term. I would like to see a better alternative.
Please provide a citation for the claim that Scandanavia is particularly interested in private primary and secondary schooling.
As for accountability of teachers and administrators, Sahlberg shrugs. "There's no word for accountability in Finnish," he later told an audience at the Teachers College of Columbia University. "Accountability is something that is left when responsibility has been subtracted." For Sahlberg what matters is that in Finland all teachers and administrators are given prestige, decent pay, and a lot of responsibility. A master's degree is required to enter the profession, and teacher training programs are among the most selective professional schools in the country. If a teacher is bad, it is the principal's responsibility to notice and deal with it. And while Americans love to talk about competition, Sahlberg points out that nothing makes Finns more uncomfortable. In his book Sahlberg quotes a line from Finnish writer named Samuli Paronen: "Real winners do not compete." It's hard to think of a more un-American idea, but when it comes to education, Finland's success shows that the Finnish attitude might have merits. There are no lists of best schools or teachers in Finland. The main driver of education policy is not competition between teachers and between schools, but cooperation. Finally, in Finland, school choice is noticeably not a priority, nor is engaging the private sector at all. Which brings us back to the silence after Sahlberg's comment at the Dwight School that schools like Dwight don't exist in Finland. "Here in America," Sahlberg said at the Teachers College, "parents can choose to take their kids to private schools. It's the same idea of a marketplace that applies to, say, shops. Schools are a shop and parents can buy what ever they want. In Finland parents can also choose. But the options are all the same." Herein lay the real shocker. As Sahlberg continued, his core message emerged, whether or not anyone in his American audience heard it. Decades ago, when the Finnish school system was badly in need of reform, the goal of the program that Finland instituted, resulting in so much success today, was never excellence. It was equity.
As for accountability of teachers and administrators, Sahlberg shrugs. "There's no word for accountability in Finnish," he later told an audience at the Teachers College of Columbia University. "Accountability is something that is left when responsibility has been subtracted."
For Sahlberg what matters is that in Finland all teachers and administrators are given prestige, decent pay, and a lot of responsibility. A master's degree is required to enter the profession, and teacher training programs are among the most selective professional schools in the country. If a teacher is bad, it is the principal's responsibility to notice and deal with it.
And while Americans love to talk about competition, Sahlberg points out that nothing makes Finns more uncomfortable. In his book Sahlberg quotes a line from Finnish writer named Samuli Paronen: "Real winners do not compete." It's hard to think of a more un-American idea, but when it comes to education, Finland's success shows that the Finnish attitude might have merits. There are no lists of best schools or teachers in Finland. The main driver of education policy is not competition between teachers and between schools, but cooperation.
Finally, in Finland, school choice is noticeably not a priority, nor is engaging the private sector at all. Which brings us back to the silence after Sahlberg's comment at the Dwight School that schools like Dwight don't exist in Finland.
"Here in America," Sahlberg said at the Teachers College, "parents can choose to take their kids to private schools. It's the same idea of a marketplace that applies to, say, shops. Schools are a shop and parents can buy what ever they want. In Finland parents can also choose. But the options are all the same."
Herein lay the real shocker. As Sahlberg continued, his core message emerged, whether or not anyone in his American audience heard it.
Decades ago, when the Finnish school system was badly in need of reform, the goal of the program that Finland instituted, resulting in so much success today, was never excellence. It was equity.
In general, when meeting a problem like "failure to capture externalities", why do you immediately jump to the conclusion that we need to nationalize that chunk of the economy?
Empirics.
Anyhow, even when we haven't exactly figured out how the market would fix it, we can be pretty sure that it would fix it somehow if we just let it work. So why is it that we always treat statism as the default position until we've shown that markets could work?
We already have plenty of pre-public infrastructure experience where the private sector underprovisions infrastructure. It's been done.
We should keep in mind how much damage the state has done, even in the last century. It was, in fact, the leading cause of unnatural death. So why is it that people fear externalities so much that are unwilling to attempt a little too free markets?
Because public libraries don't kill Grandma. Also, back to the point on public healthcare.
You must be aware that there is such a thing as financial markets. People can borrow money. Indeed, if a project is beneficial to society, then entrepreneurs can expect a lot of revenue, and it will be no problem to find investors who want a slice of that. Who doubts that?
It sounds like it would work, but it doesn't in practice.
If a it is long term profitable to become a large bank, why would it be a problem to find investors who want to provide the money to start out large?
Banks aren't necessarily concerned with a time horizon beyond the average tenure of a board member or shareholder.
If they can't make a profit, then there are more valuable uses of those resources and the project shouldn't happen.
The problem is when some of the highest returning investments are foregone because of the huge number of potential customers who don't have enough individual interest to fund the project.
In healthcare, a large portion of costs go toward paying administrative and marketing costs, which are much lower under public programs. Rail lines could be privatized, but if they're a natural monopoly they still have to be regulated. Otherwise one ends up with a situation like British Rail.
True, but the evidence on private schooling is mixed at best.
Countries with private healthcare (I'm talking about the US in this case) manage to save more children, but that means they delay the death of many into that window where it is counted as infant mortality. In Europe they die before it is counted as infant mortality, hence a lower infant mortality rate. You can look this up, it's accurate.
Please cite sources that "Europe" has a higher rate of death pre-infant mortality. I'm not sure what you mean. Are you saying that the EU has a higher rate of miscarriage? The "window" counted as infant mortality begins at birth. It's the ratio of infant deaths to live births.
That means that it is very much profitable to make an innovation, because the creator can monopolize it for a while while others catch up.
Many of these statements are hypotheticals which are not supported by evidence.
Yeah, I guess there's a study saying everything. That's why empiric studies get us nowhere.
I would agree with your point if there was significant disagreement between studies. But there is still an overwhelming majority of findings indicating that public infrastructure is productive on average in the United States.
The opportunity cost to the economy is going to be mediated through taxes, lending, inflation, and interest rates, where it exists. Cointegration implicitly takes into account financing constraints as long as the funding components- borrowing, taxes, inflation, etc- are not extracted from the model (they rarely are). Endogenous tax and borrowing changes coming before or after spending changes exert their effects on the spending regression. It's even possible to construct a more detailed nonlinear model explicity accounting for tax changes.
mustang19: GMM, VAR, cointegration, and other techniques all use lags to determine causality. If it's obvious to you, it's probably obvious to the person who made the study. "Public" is a precise and commonly understood term. I would like to see a better alternative.
Once again ignoring the Broken Window I see.
On Finland:
I'm not familiar with their system, but I wouldn't be surprised to see it was better than the US's.
Explain please?
Do we? The railroads were subsidized monetarily and through land grants. Highway systems were monopolized by states and federal government.
Could you actually answer? Me picking my nose doesn't kill Grandma either. So now we should pay me 500k a year to pick my nose right?
Ha, oh really? Banks don't lend to businesses for long term projects?
Proof? Are you claiming that banks don't offer long-term loans?
This doesn't make sense to me. The returns on an investment are defined by the interests of the consumer.
Oh really, administrative costs are less in public programs?
http://hadm.sph.sc.edu/Courses/ECON/classes/Friedman.html
Hospitals are increasingly state-monopolized and they then hire tons of useless workers.
Ah. This is the study that samples 3% of charter schools? Sounds good.
Once again ignoring the broken window.
What?
Empirical evidence, or evidence obtained from observation.
Largely because railroads and highways often did not exist at all before government involvement. The railroad bubble wasn't a bright moment in public infrastructure, but as a whole these programs were important to industrialization.
So now we should pay me 500k a year to pick my nose right?
No.
Often, in high-return infrastructure projects, they don't.
The previous studies noted underinvestment in infrastructure, with reduction in public funding exacerbating underinvestment.
edit: Here's a more detailed look at the rationale for public infrastructure investment. There's the simple answer, then there's the complicated matter of particular externalities involved in infrastructure that are dispersed too thinly across the economy for the agents benefting from them to be interested in investment.
In other words, there are two public-good problems. The improvement in infrastructure to raise transaction efficiency may itself be a public good. However, even if this public-good problem can be overcome through excludability, there is another public-good problem at the level of the increase in the level of specialization that the higher transaction efficiency contributes to. Even with perfect foresight, each individual does not take into account the benefits of a higher level of specialization because that level is determined by the general level of transaction efficiency prevailing in the whole economy, not appreciably affected by that of the individual. Even if, especially after writing this paper, we correctly foresee that the widespread use of a new communication system will promote specialization and make a number of new products available in the market, we will not count the benefits of the availability of the new products in assessing the usefulness of the new communication system to us, as the new products will be available even if we do not use the new communication system but if others do. This second level of publicness problem is quite impossible to solve through exclusion, as the producers of the new set of products are typically different from the producer of the infrastructure. Thus, the indirect externality of infrastructure may then make the public provision or encouragement desirable. The Yang-Ng framework of inframarginal analysis is used in the next section to analyse the case for encouraging improvement in transaction efficiency over and above its direct benefits. (3) Our results are consistent with the empirical evidence that public infrastructure capital has positive long-run effects on output and that 'the short-run rates of return are rather low while the long-run rates of return tend to be quite high' (Demetriades & Mamuneas 2000, p. 689). It takes time for the higher degree of specialization to develop.
Voters are consumers, and if they don't expect a return they vote against a project.
Referring to your source:
Growing costs, in turn, led to more regulation of hospitals, further increasing administrative expense. Unfortunately, I have been unable to uncover comprehensive and readily available data for a sufficiently long period to judge how large a role was played by increasing administrative costs. Anecdotal evidence suggests that increased administrative complexity played a major role in the explosion of total cost per patient day, and led to a shift from hospital to outpatient care, accelerating the decline in occupied beds.
The evidence that public healthcare rather than HMO managed care is the cause of this increase remains "anecdotal". Again, healthcare inflation was not much slower before Medicare and Medicaid.
The sources you requested.
Give examples.
While we're at it, here's Adam Smith on the subject:
According to the system of natural liberty, the sovereign has only three duties to attend to . . . First, the duty of protecting the society from violence and invasion . . . secondly, the duty of protecting, as far as possible, every member of society from the injustice or oppression of every other member of it . . . and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit would never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.
mustang19: Empirical evidence, or evidence obtained from observation.
Once again, ignoring the fundamental argument permeating the entire thread which you don't care to address. Before we continue discussion, would you please summarize the parable of the broken window and its implications?
You continue to refer to emergence of public works as proof that private works did not work, yet refuse to acknowledge the government's lead in infrastructure and also the likelihood that transportation spending did not merit its own costs in those eras which you point to. Sure there were no private freeways in the colonial era, because they weren't wanted. Mass transport spending projects came with the civil war with state railroad projects and then state roads. Private transportation infrastructure hasn't been granted a chance.
I understand the parable like this: Government activity produces negative consequences that may be assumed to exist without proof.
Actually, there was a long history of counties and states pursuing local private rail systems without investing in national scale projects. There's little reason something like the interstate highway system wouldn't have been just as productive if created earlier in industrializing New England, either. Even after many decades, the private sector never stepped in.
It's possible to claim that private sources would have eventually decided after tens or hundreds of years to begin builiding a significant number of highways. But considering the high productivity of public programs enacted, and the fact that countries with private infrastructure do not experience particularly high infrastructure returns, there's not much indication that the private sector would do better, if it invested at all.
mustang19:GMM, VAR, cointegration, and other techniques[which?] all use lags[clarify] to determine causality. If it's obvious to you, it's probably obvious to the person who made the study.
Earlier in this thread, you were asked:
Can you prove that the growth happened because of [European state welfare and nationalization programs] or did it happen in spite of them?
And you answered:
In other words, you admitted that you can't prove any causal link(s) concerning the (alleged) statistical correlation between the advent of European state welfare and nationalization programs and subsequent economic growth. But instead of owning up to this admission, what do you do next? You try to wiggle out of your admission by making an argument from verbosity. Try again.