E. J. Dionne leaps to the defense of government:
So when conservatives say, as they regularly do, that “government doesn’t create jobs,” the riposte should be quick and emphatic: “Yes it has, and yes, it does!”
I don’t want to fall into the technocratic fallacy but is the word of a man who’s probably never taken an economics course in his life (and may not have taken a math course since junior high) sufficient evidence to believe this? The only way that the federal government can on net create jobs is by creating more money to pay for salaries of those workers. That may have economic repercussions of its own, at the very least deadweight loss.
That alternative is not available to the states. In the states, when left to their own resources, more higher-compensated government workers either means fewer total government workers or fewer private sector workers or both.
He really should read The Seen and the Unseen. He sees the teachers, firefighters, and police officers. He doesn’t see the millions of retail jobs lost due to higher sales taxes, the homes lost and urban blight induced by higher property taxes.
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And, importantly, that’s not controversial. Keynesians, neo-Keynesians, neo-Classical, Austrian, and monetarist economists all agree on it.
I can give dozens of examples of developments that are critical to today’s economy for which much of the financing, particularly in the early days, was from the government. I’ll give three as an appetizer: the Internet (based on the DARPANet), GPS (it began its life when government scientists were tracking Sputnik), and, basically, all modern computers (ICs and printed circuit boards weren’t invented with government money but they were developed with it—they were necessary for the space program).
However, I think it’s a stretch to infer that because a couple of hundred thousand dollars spent developing the DARPANet turned out to to be a good investment that spending billions to (to use PD Shaw’s example) putting breakdown lanes on rural highways is equally good. It’s a case by case thing.
My reading of history is that mass engineering projects, e.g. the space program, have provided a much better bang for the buck than subsidizing road travel in preference to rail travel or, worse, air travel over rail. They also provide a better bang for the buck than well-intentioned social programs like Head Start, which I supported for decades but which study after study has found to be, essentially, useless.
That’s why I’ve spoken out here in favor of mass engineering projects. However, those projects today won’t provide tens of thousands of jobs to semi-skilled or unskilled workers. But they might provide the foundation for the economy of the future.
A personal computer that cost several times more than the average home? Just because the average person would be completely fucked if they bought one doesn’t make it personal.
I think that characterizing the 610 as a “personal computer” is being waggish. It had an operators console from which it could be programmed. My definition of personal computer would include things like size and affordability.
The 610 was about the size of three ordinary washing machines placed side to side and probably heavier. The cost has already been mentioned.
I had always heard that the Altair 8800 was the first true personal computer, although microcomputer may have been the term instead.
I believe the Altair was the first general purpose production microcomputer system. I don’t believe the term “personal computer” came into use until IBM used it for their first successful general purpose microcomputer product.
And as I pointed out, it was at an IBM lab on the campus at Columbia. The idea that it would not have happened but for the grace of government spending is highly dubious, yet that was steve’s implication.
And DARPANet wasn’t set up to be used as as it is today. It was initially envisioned as a way for the military to keep in contact across the U.S. in the event major portions were taken out by nuclear weapons/invasion. Much like the national highway system. And then there were all these other ancillary benefits that were not initially anticipated. And in the case of DARPANet it spiralled almost completely out of government control….hmmmm lesson to learn there (I’d even argue that the internet is not unlike the Wild West…and you even have spontaneous creation of order on the interwebs…how can that ever happen)? Note that the government is trying to play catch up and retake control. What will happen then?
The elephant in the room none of the pro-government people seem to really want to address is that while there are very good examples of why government can improve social welfare (dealing with negative externalities like pollution, or even helping positive ones like vaccine programs, or public goods like a national highway system) doing that stuff and only that stuff would mean huge cut backs in current levels of government.
For one thing….most health care does not fit into the public good definition nor the externality definition. Oh and look at Dave’s latest post…teachers are losing their jobs because they wont even look at renegotiating contracts that deal with pension and health care that are breaking state budgets…..sorry pro-gov guys, I just can’t trust you guys when it comes to this, “We need an efficient government….” And yes, I know we can always change definitions, but that does not make subsidizing the consumption of private goods good policy. And repeating over and over that doing more of what is causing problems will eventually lead to a solution is, as Dave has already pointed out, voodoo.
Go back upstream a bit and look at my post about how government and the democratic process tend to be non-rational. Even if we elected super smart, super rational people we’d still have a democratic process that is non-rational. It is how democratic processes work. If it is a fundamental characteristic. You cannot get rid of it.
Now I know some of you will say, “Oh gee Steve V. you want a dictatorship?!?! Hurrr durrr hurr….hurf blurf!!!” Of course not. Democracy is still the more preferred form of government, but that doesn’t mean we should let government grow and grow and grow. When government grows it does so at the expense of the private sector. And the private sector is where you get the jobs. The private sector also improves social welfare as well (for the most part).
And let me tell you we let it grow. Especially in times of crisis like not to recently. We had Congress beings saying, “We must act NOW!!!! Do something!!!! Anything!!!!” (e.g. Barney Frank). Government expands rapidly both in size and scope. And when the crisis passes government shrinks, but not back to its pre-crisis levels (see Higgs, Crisis and Leviathan). Will we see government shrink back to its pre-financial crisis levels? No. Same thing with 9/11. We’ll have the fallout of the Patriot Act for years to come. And amusingly, the ones most happy with things like TSA crotch groping…the progressive liberals. Never mind that the next terrorist attack will likely come from a completely different direction…cause Goddammit we have TSA Kabuki at the airports and seeing little kids get their crotches groped makes us all feel safer.
Its rather amusing. I make an argument that strikes at the very heart of the progressive liberal position: that the process you want to use to allocate more and more resources in society is fundamentally non-rational and the response is: DARPANet!!!!!!
Seriously?
This is a statement of faith, not fact. Numerous examples upthread where this is not true. You dismiss DARPANET because “DARPANet wasn’t set up to be used as as it is today.” But that’s irrelevant. Alaska wasn’t meant to be a source of oil, but it is, and it’s ouroil because the government bought Alaska. GPS wasn’t meant to guide lost tourists around Boston but it does do that, and it does that because of government investment of taxpayer dollars. The interstates were not meant to give rise to motel chains and overnight delivery, but they did.
If you’re going to dismiss every fortuitous but not-originally-foreseen benefit from the equation, you’ll have to do the same with business as well. And to be fair you’d have to throw the negatives in there as well. After all, what do you suppose the downstream effect has been of big business investments in tobacco and soft drinks, or their resistance to car safety? How much lost productivity and tax money has that cost us?
Steve, it’s simply undeniable – at least rationally – that government has created jobs, and has very significantly empowered private industry, and continues to do so, and it does not always result in net fewer jobs. Your faith is just faith, it conflicts with reality.
No, I dismiss nothing, I’m trying to point out that you have a handful of examples. A biased sample. Government spending is vast and to pick a few examples that worked out to justify the other bloated wasteful spending is sophistry.
So your argument for government spending, to give the TL;DR version is: Luck.
Again, I’m not dismissing anything, what I am pointing out is that sure an unsophisticated look at these things might lead one to say, “Sure, more government spending.” But the problem is that looking at the biggest darling, DARPANet, you see that it wasn’t really the government, but what private firms did with the base idea. All the jobs as a result of the internet aren’t the result of a grand and brilliant government scheme, but the result of people wanting to make a buck. Yes, the government got the ball rolling, but they had absolutely no clue about how it could be used and if left to them they’d never use like it has been used. So at best your argument is, yes government spending…but we can have a huge reduction in what we spend but we’ll just have to focus it better…that efficiency argument you were making a few posts back. Oh and give me an unbiased sample for business and I’ll make the case for zero government regulation.
Ok, you don’t get it either. Here is my point on jobs vs. desirability of government programs. A government program can cost us jobs, on net, but still be desirable. Example: a vaccination program. Taking money for that and funding the program may very well cost us jobs. But the positive external benefit from reduced disease incidence may very well swamp the lost jobs. So a rational policy is: fund the vaccination program. So, in terms of “creating jobs” there is no argument for you there, there is an argument that the benefits aside from jobs are greater than the lost jobs so do it anyways. And we can’t look at just this example and say, “See government spending is everywhere and anywhere a good thing.” Sometimes it is, but I’d argue more often it is due to rent seeking when you get right down to it.
And it is not faith, it relies on a widely accepted and non-controversial result from micro-economic theory. One backed up by a rigorous mathematical analysis and empirical evidence. Only the very fringe kooks dispute the issue of deadweight loss. Every government program comes with a deadweight loss. So no government program by itself can result in increased economic activity over an above what we’d otherwise get. Still, we might get greater benefits from some of these government programs so they are worth doing. I’m not saying, no government programs, I’m saying most of the are a waste. Even the good ones, like public schools, are seriously fucked up. So much so they are fucking up other stuff seriously too.
See your problem is a lack of understanding. The benefits from a program like vaccinations isn’t just economic output. It is feeling better by not having a disease. If you have polio you are worse off than if you don’t. If vaccines reduces the incidence of polio or even eliminates it everyone is better off. It is a good thing. And that good thing, all by itself, is probably worth the decrease in jobs.
Economics is just about money. It isn’t just about making stuff. It is about how to allocate resources so people feel as good as possible…how to maximize welfare of consumers…people. It involves trade offs and government comes with trade offs. And the progressive liberal attitude is one that does not have sufficient appreciation for the downsides, look at you, steve, and Dionne. You are operating under the false belief that government can create more than it costs us in terms of jobs. That simply isn’t true. Now that doesn’t mean we shouldn’t have any government at all, but that government should not be the default solution…which is what we are moving towards. We already use government to allocate a vast amount of private goods…and look it is totally unsustainable (health care).
I’m not the one with views that are in conflict with reality…its you.
That should read,
Typing too fast….
Steve V. touches on something that I’ve posted on here before so I may as well chime in. Steve V. writes:
When you get right down to it there are only two ways of allocating resources: by market and by fiat. That in general markets allocate resources to maximize welfare is a non-controversial finding of micro-economics. It’s something we shouldn’t be arguing over.
It is why the Soviets failed, why the Chinese authorities ended up pegging their currency to ours, and why they’re now thrashing with their economy. Command (fiat) economies have fundamental problems. By their very nature they obscure the price signals that are needed to maximize welfare.
It’s a big part of the problems we’re having with our healthcare system: our healthcare system operates under a command regime.
Market systems have problems but they don’t have fundamental problems.
There are reasonable discussions to be had over whether decisions are free or coerced, over the best strategies for managing the money supply, and where there are market failures. But we really shouldn’t be arguing over whether in general the preferred solutions should be market or command.
Steve V:
Let me just start with this, which I think is the heart of the matter:
(My italics)
By itself. In other words, if the government builds the interstates, that in itself cannot result in net jobs. Ditto GPS and DARPANET, etc… The jobs come from private industry exploiting that new resource.
And it doesn’t seem to you that you’re describing symbiosis? Interdependence? You’re drawing an arbitrary circle around one part of a symbiosis and pretending that the interdependency is not crucial in both directions. You’re pretending the house doesn’t need the foundation.
How much of a trucking industry exists sans intestates? How much of Apple and Google goes away without GPS? How much meat would you buy if you knew there was no inspection regime, no law governing public health issues? And how much less would the beef industry be worth? How often would you fly if you thought the airlines were making up their own safety regs, and how much less might that industry be worth?
Business and government need each other. It’s not just the poor or the helpless who need government, it’s also the Drews of the world, because without government they would have smaller businesses and fewer jobs. No interstates, no secure sea lanes, no safe air travel, no defense against monopolies, no regulations that limit races to the bottom on safety. Those are not just things that make us feel better, those are examples of government making us richer and providing jobs.
Which is why, when you look around the world, you see that those nations with democratic governments that carry out public works and regulate industry and provide a safety net are also — by amazing coincidence — also the wealthy and productive nations.
If government is detrimental to business, if it does not add to the capacity of business to create jobs and wealth, then where is your example in the real world? Your theories run smack into reality. There is a 100% overlap between “rich” and “regulated,” and a very high degree of correlation between governments that help with research and with public works and public health etc… and nations that are rich and happy and stable.
If I’m wrong, show me the place in the real world, that proves it. If the theory is correct, surely there will be several real world examples.
@Dave
“Market systems have problems but they don’t have fundamental problems.”
Perhaps they don’t, but you’ve argued that without some kind of redistribution a la Social Security, we’d all be a lot poorer than we are now. Apparently a market system alone would result in less wealth all around. And a lot more misery.
There is a 100% overlap between “rich” and “regulated,” and a very high degree of correlation between governments that help with research and with public works and public health etc… and nations that are rich and happy and stable.
The Soviet Union was very regulated, and not at all rich. Cuba is exceedingly regulated, and not at all rich. Venezuala is adding more regulations by the day, and is getting poorer as a result. China is getting richer, but they’re still poor when it comes down to it, and a lot of their new wealth is the result of lessening regulatory burden. (That is not a new phenomenon for China. I remember reading a cyclopedia on Chinese history from either Oxford or Cambridge, and some emperors in the past presided over booms brought on by lessening restrictions on business. It’s been almost 25 years since I was reading that stuff, though, so I can’t remember which emperors.)
“And it is not faith, it relies on a widely accepted and non-controversial result from micro-economic theory. One backed up by a rigorous mathematical analysis and empirical evidence. Only the very fringe kooks dispute the issue of deadweight loss. Every government program comes with a deadweight loss. So no government program by itself can result in increased economic activity over an above what we’d otherwise get. Still, we might get greater benefits from some of these government programs so they are worth doing. I’m not saying, no government programs, I’m saying most of the are a waste. Even the good ones, like public schools, are seriously fucked up. So much so they are fucking up other stuff seriously too.”
I actually agree with most of this. I have not meant to imply that a vaccination program by itself creates jobs. It adds sufficient value that it is worth it. It frees up monies that would otherwise have been spent on medical care, and it increases or saves human capital. That capital is what can lead to the creation of new jobs.
“Economics is just about money. It isn’t just about making stuff. It is about how to allocate resources so people feel as good as possible…how to maximize welfare of consumers…people. It involves trade offs and government comes with trade offs. And the progressive liberal attitude is one that does not have sufficient appreciation for the downsides, look at you, steve, and Dionne. You are operating under the false belief that government can create more than it costs us in terms of jobs. That simply isn’t true. Now that doesn’t mean we shouldn’t have any government at all, but that government should not be the default solution…which is what we are moving towards. We already use government to allocate a vast amount of private goods…and look it is totally unsustainable (health care).”
Imagine no public schools, no police and no fire departments. Travel the world or read history and you do not really have to imagine. Without critical government institutions, you have very little sustained economic activity. Indisputable. I would also agree that too much government destroy economic activity. So where is the goldilocks point? I would submit that in our democracy we have done a pretty good job figuring that out. (I should probably admit that I believe in the concept of positive liberty, but I guess it is obvious.) We have been willing enough, smart enough, or maybe a democracy works as its own kind of ideological market that we were willing to let govt spend on basic research, to spend on vaccination programs, to start a space program and to spend on modernizing agriculture.
So what is our problem now? Thank you for the health care reference. Take away the health care issue, and government is sustainable. (Costs are rising just as fast in the private sector, so it is unsustainable there also.) Solve health care, and we are back at our revenues matching our spending. Our problem is not overly expansive government, it is health care costs spiraling out of control.
As a bonus, put government employees in defined contribution plans and figure out a way to keep the banks from crashing our economy, and we are sustainable and competitive for a long time.
Steve
Michael,
You are still working off of a biased sample.
Let me pick 10 examples of business doing great stuff and will you then conclude that there should be zero government regulation? Of course you wouldn’t. You’d be stupid too.
Stop presuming the rest of us are stupid. Government, by itself does not create jobs. That was the premise that Dave selected. I think it has been shown that such a premise is true.
Sometimes the government stumbles upon a good idea and does it anyways and very good things follow. But taking that argument as some sort of argument in favor or massive spending increases is just simply foolish. That is why I pointed out that many of the wonderful policies and programs you point too as “successes” were successes almost by accident. Lets build a national highway system for national defense purposes….oh wow, the worked out great! Look how it enhanced interstate commerce. Lets implement the DARPANet on a nationwide scale, could be useful for the military (the earliest domain names were .mil, btw). Oh, wow, look what it has done…revolutionize communications, brought about online commerce, made logistics easier, and created lots and lots of jobs. All by good luck. How many other programs was money spent on that went precisely nowhere or ended up with bridges to nowhere and other crap? I know lets build another international airport in Southern California…we have something like 4 already, but surely we could use a 5th and 6th…maybe a 7th. That is what Japan did, and now those international airports sit pretty much empty. And guys like Krugman tells us Japan didn’t spend enough….please.
I’d argue you have cause and effect backwards. Our government was very weak until around 1935ish or so. We became quite well off prior to that despite the weakness. And even many policies you see today really didn’t start gaining serious traction until maybe a decade or two later. Medicare itself took about another 30 years to materialize. I’d argue it was the accumulation of wealth and a strong stable market based economy that allowed us to pursue many of these policies….these policies are, in effect, luxury items. Which is why if you tried to implement them in developing countries it would probably be a spectacular mess. Even Paul Krugman, back when he was sane, made a somewhat similar argument (link). He was talking about wages and labor standards which falls in the policies and programs you are talking about.
See Dave and Icepick’s comments. Both are good on this point.
steve,
No. No I wont, because I’m not arguing for that…well okay, maybe the police as they are becoming little better than highway robbers and thugs themselves, but not the rest.
Hmmm, and on further thought we might not have public schools either, but if that comes about it will probably be due to government screwing that up so much that we simply wont be able to afford them. Wait…weren’t you telling me about creating jobs?
Not hardly. We still have massive amounts of spending going on. Our current deficits are not due entirely to health care. And for the states pension plans are a big, big problem too.
Like I said…government is non-rational. Good luck with the above. I have no hope of either of those things happening. Really, it is why I don’t vote anymore (pointless) and have cut way back on blogging (too depressing). I find it much more enjoyable to play World of Tanks. I get to blow stuff up and relieve stress and tune out all this depressing news, and I recently unlocked the Panther II…awesome tank.
Ok, I think there’s a pretty big distinction between the proximate and distal factors in “creating” a job. While it’s true that a lot of jobs would not exist without services provided by government, that doesn’t, it seems to me, suggest that government “created” those jobs.
So while I agree that a lot of the things mentioned by steve and Michael are important (even buying Alaska), those are so far down the causality chain that I think it’s a pretty big stretch to say, for example, that jobs in Alaska were “created” by government. And Steve V’s point about serendipity is well said – GPS, ARPANET, the Space program, etc. were not intended to be “jobs” programs – they were intended to solve military problems (the first two) or were part of a political competition with the Soviets. The point is that the benefits of those program are not reliably replicable – government can’t sit down and intentionally invent something like the internet.
So job creation is, in my view, actually hiring people and I think that it was EJ Dionnne was talking about and was the point of Dave’s post, ie. government creating jobs is government hiring workers. And as someone who gets his bread buttered by government funds, I think it’s true that society would be marginally more productive if me and my wife worked in the private sector. The reality, though, is that a military along with police, and other things are necessary and so we have to pay for those even though it’s a net economic loss.
“even though it’s a net economic loss.”
But at some point, it is not. Or, maybe it is just a coincidence that countries w/o functional government, including police and teachers, have very poor economic output. Didnt the military have you travel?
Steve
steve,
Yeah, I’ve been in a lot of third-world shitholes – I know what that’s like.
Let me put it this way. Government is like sleep. If I didn’t sleep I wouldn’t last very long and therefore I couldn’t get anything done. But sleep, by itself, isn’t a productive activity (I can’t make widget in my sleep for example) even though it enables me to be productive during my non-sleep hours by keeping me sane. Also, if I sleep 24 hours everyday my productivity drops to zero. On the other hand, if I didn’t need sleep I could be a lot more productive because I would have a lot more time to make widgets or do some other productive activity. Same concept with government.
I think net economic loss is a bit strong. I think we can have a net positive gain, economically speaking, from some government programs. Limiting the discussion to just jobs….no. Granted in some cases government might stumble across a jobs goldmine, but that is more by luck than by design. Nobody working on DARPANet sat there saying, this will be a huge source of jobs in the future. Same with GPS and many of the other examples.
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