Political Roundtable Cosmic String of Cataclysm - Part V

[sfam]

Your last paragraph diverges into a question about macro policy. I firmly believe that the U.S. government cannot create jobs with discretionary stimulus programs. The U.S. government can invest in public infrastructure, and create a stable macroeconomic environment that lowers the costs of risk for the private sector. That's it. That's where I diverge significantly from Krugman. I think there is a danger in having too much faith in your own massive intellect. Sometimes the smart thing is to know your limits, and the utility of stimulus policies is very limited. Add in the fact that 70% of what actually goes into a stimulus package is pork and other politics driven earmarks that will have no stimulus effect whatsoever, and you have a very strong argument for keeping your efforts to steer the economy with macro policy to a minimum.

Why do you say Pork doesn't have a stimulus effect? That's in fact its basic purpose - to create new jobs in a political district. As for Government not creating jobs, does this mean you are in favor of stopping funding to Lockheed Martin, Ratheon, Northrump Grummand, Boeing, General Dynamics and the rest? This is where the vast bulk of the $600 Billion+ in the Defense budget is going, which of course translates to millions of jobs.

But cutting teachers or police officers from State budgets, which are happening now, or cutting defense contractors, or K-Mart closing down all leads to the same thing - more people on unemployment, which leads to less tax revenue in the Federal coffers, and subsequently a greater debt to GDP.

[Zonkerbl]

So my third answer is, if the current government is doing a lousy job addressing market failures properly, is it better to just eliminate the government altogether, recognizing that they will never figure it out? Or should we take the current government and try to push them towards doing a better job addressing market failure?

As a practical matter, I don't think it's possible to just tear the government down and then rebuild it with a better mission. If you are going to try to address market failure at all, you're stuck with what we have now.

And finally, a lot of government activity is related to establishing and enforcing property rights. The system we have now is the best in the world, bar none. That part of the government does an excellent job incorporating economic analysis into decisions where relevant. It's just that court decisions are usually for extreme cases. It's the everyday, noncontroversial decisions that are actually about 90% of the effect of the government on our lives that has no economic rationale.

Actually, the US Patent office is falling woefully behind, especially in the technology world. One needs only look at the fact that every main company is continually creating lawsuits against everyone else for almost every successful product. The fact that the Patent office approves Apple's patent application for natural finger gestures shows how screwed up the system is. Everyone in tech agrees this is costing us billions in cost, and significantly impacting innovation. Lots of small companies completely stay out of contested markets because they don't have the financial resources to respond to the lawsuits that will inevitably come.

Hm, yeah. That's a problem, and my brother works in a company where patent trolls are a real problem.

USPTO is kind of a victim of its own success. These problems arise precisely because we have the best patent system in the world. All the other ones are even worse.

USPTO, by the way, is one of the best run agencies in the U.S. government.

[sfam]

So my third answer is, if the current government is doing a lousy job addressing market failures properly, is it better to just eliminate the government altogether, recognizing that they will never figure it out? Or should we take the current government and try to push them towards doing a better job addressing market failure?

As a practical matter, I don't think it's possible to just tear the government down and then rebuild it with a better mission. If you are going to try to address market failure at all, you're stuck with what we have now.

And finally, a lot of government activity is related to establishing and enforcing property rights. The system we have now is the best in the world, bar none. That part of the government does an excellent job incorporating economic analysis into decisions where relevant. It's just that court decisions are usually for extreme cases. It's the everyday, noncontroversial decisions that are actually about 90% of the effect of the government on our lives that has no economic rationale.

Actually, the US Patent office is falling woefully behind, especially in the technology world. One needs only look at the fact that every main company is continually creating lawsuits against everyone else for almost every successful product. The fact that the Patent office approves Apple's patent application for natural finger gestures shows how screwed up the system is. Everyone in tech agrees this is costing us billions in cost, and significantly impacting innovation. Lots of small companies completely stay out of contested markets because they don't have the financial resources to respond to the lawsuits that will inevitably come.

Hm, yeah. That's a problem, and my brother works in a company where patent trolls are a real problem.

USPTO is kind of a victim of its own success. These problems arise precisely because we have the best patent system in the world. All the other ones are even worse.

USPTO, by the way, is one of the best run agencies in the U.S. government.

Talk about an agency that needs to get LOTS LOTS bigger! Nope, keep it the same size as the 1930s - surely the pace of innovation hasn't changed since then. Work smarter, not harder!!!

[DCZards]

By survival of the fittest, I was referring to societies weeding out the financial dregs...hence the mention of thinning the herd. The biggest predator humans have is in fact society, and we should indeed be prey in far more instances, unfortunately for overall finance many governments feel the need to "protect" us. So for every 1 going hungry for legitimate reasons, you have 10 well fed citizens claiming the same benefits due to lack of appropriate checks. Same with housing, welfare, unemployment etc etc....

Who, pray tell, are the financial dregs? Is it the Robber Barons on Wall Street and in the suites of many American corporations? Or is it just those “weak-minded” poor folks who haven’t figured out how to game the system the way that the robber barons have?

And why do you only single out those individuals receiving govt. subsidies in the form of help with housing, food, etc.? What about those receiving govt. subsidies by taking advantage of tax loopholes, off-shore banking accounts and all sorts of corporate welfare? Do they get a pass?

And where do you get this stuff about there being 10 well-fed people getting govt. benefits for every one person that is actually hungry? I’m not saying that there’s not abuse, but that sounds to me like something you believe and not anything you can back up with data.

Sorry guys if I’m overreacting a little, but nothing galls me more than the kind of elitism and outright disdain for the poor and dependent that induveca often exhibits.

[Zonkerbl]

Your last paragraph diverges into a question about macro policy. I firmly believe that the U.S. government cannot create jobs with discretionary stimulus programs. The U.S. government can invest in public infrastructure, and create a stable macroeconomic environment that lowers the costs of risk for the private sector. That's it. That's where I diverge significantly from Krugman. I think there is a danger in having too much faith in your own massive intellect. Sometimes the smart thing is to know your limits, and the utility of stimulus policies is very limited. Add in the fact that 70% of what actually goes into a stimulus package is pork and other politics driven earmarks that will have no stimulus effect whatsoever, and you have a very strong argument for keeping your efforts to steer the economy with macro policy to a minimum.

Why do you say Pork doesn't have a stimulus effect? That's in fact its basic purpose - to create new jobs in a political district. As for Government not creating jobs, does this mean you are in favor of stopping funding to Lockheed Martin, Ratheon, Northrump Grummand, Boeing, General Dynamics and the rest? This is where the vast bulk of the $600 Billion+ in the Defense budget is going, which of course translates to millions of jobs.

But cutting teachers or police officers from State budgets, which are happening now, or cutting defense contractors, or K-Mart closing down all leads to the same thing - more people on unemployment, which leads to less tax revenue in the Federal coffers, and subsequently a greater debt to GDP.

I mean that, to the extent that pork is equivalent to digging ditches and filling them up, they're not really "creating" jobs. They might successfully transfer jobs from one political district to another, but that's it. I would argue similarly for the defense budget. What is the value added of building something that will eventually just be blown up? What's the difference between that and digging a ditch and filling it up?