I’m still perserverating on Joseph Stiglitz’s remarks about high-return investments. Does anyone really oppose making high-return investments? I would assume that businesses don’t need other incentives to jump all over them. The investments that require government intervention are those with low returns, very long payoff times, or too speculative.
Even saying that we need to put stimulus spending into high-return investments assumes that we are, effectively, leaving money on the table. Is that really the case? Quite to the contrary I think that problem is more that we have already picked the low-hanging fruit, there are no easy, short-term high-quality investments to be made, and what we are left with have returns that are too low for the bucks we’d invest, take an unacceptably long time to materialize, or are just too oblique.
Furthermore, I’m not convinced that going after such projects would resolve the near term problems we face. Let me give some examples.
Outer space exploration can almost unquestionably yield a high return on investment. Not only is there a lot of knowledge to be gained but there’s a lot of stuff out there. Stuff we want. Room to put stuff we don’t want, well out of the way where it’s not in anybody’s backyard.
Closer to home putting a little more investment into the education and care of a kid who without it would be a lifelong ward of the state sounds like a pretty high-return investment to me. I’m not talking here about average kids who just aren’t interested but about kids with special needs who with the right care and education can be self-sufficient or nearly so. Another example: pre-natal nutrition and care. Incentives for mothers to stay off drugs and alcohol. That kind of stuff can pay off for sixty or seventy years worth of enhanced productive activity. It won’t put a lot of unemployed people to work, though.
I’m beginning to wonder about Nobel Prize winners. And Finanical Times op-ed writers. These observations are almost too vapid for words.