Political Roundtable - Part VI

[barelyawake]

When they say "the government isn't good and picking winners or losers," they mean that the government puts money into companies undeserving of money (money they haven't earned through the market by attracting customers). And therefore money is wasted because the companies go belly-up since they are producing a product that the market doesn't want (because if the market wanted it, then they would be making profits on their own and not need subsidies). They mean that the underlying product or management is a loser, thus the subsidy won't help.

Again, that is completely different than saying the government shouldn't be picking winners.

[Zonkerbl]

When they say "the government isn't good and picking winners or losers," they mean that the government puts money into companies undeserving of money (money they haven't earned through the market by attracting customers). And therefore money is wasted because the companies go belly-up since they are producing a product that the market doesn't want (because if the market wanted it, then they would be making profits on their own and not need subsidies). They mean that the underlying product or management is a loser, thus the subsidy won't help.

Again, that is completely different than saying the government shouldn't be picking winners.

Well, I don't know who "they" are.

When I, as a professional economist, advised my political masters at the Department of Commerce not to "pick winners," it was mainly because doing so accomplishes nothing but create a cadre of extremely wealthy lobbyists.

I can't speak for Fox News. But I suspect they push the anti-picking-winners talking points because some economist, probably at the Mercatus institute, told them it was a bad idea. If it was the Mercatus institute, then it was because of the reasons above.

[barelyawake]

"They" are Republicans. And they started the meme to speak about Solyndra and green energy (actually they started it when talking about Carter and solar energy). And what the meme is meant to express to those listening is what I stated above. They want to make it seem as though all subsidies are wasted on unworthy companies, thus cutting funding is cutting waste.

[dckingsfan]

Actually the "they" are Republicans, Democrats and Independents.

And "they" were just talking about specific investments as described before in the thread

And you as an economist would recognize the different types of investments and which are most beneficial.

[dckingsfan]

I know this is a Republican meme, but it's actually untrue. Has American oil been a loser? Because we have been "picking" oil as a winner for a good long time now -- and subsidizing it all along. How about corn production? Is that a loser? We subsidize corn and thus everything in the grocery store is either made of or fed corn. How about weapons manufacturers? Are they winners or losers? Actually most of the things we "pick" become winners just because we picked and subsidized them. And the Republican complaint only comes about when we pick things that are competition to those who fund them. Thus all the bemoaning "picking" green energy, but not about subsidizing oil or oil pipelines.

I am not a Republican, and the idea should stand on its own merit vs. anything Republican or conversely Democrat must be bad. I hope that you can see that you blast most ideas as "Evil Republican" to dismiss them. You aren't going to be able to discuss ideas with others if you immediately castigate and frame the idea in the context of a party. Just think about the parties as big corporations that want your money and market their ideas to you.

Long term, never ending subsidies of oil, nuclear and the others were not a good idea then and not a good idea now. But, subsidies for an industry are different from guaranteed loans for a business (picking winners and losers) - which have bit us in the backside many more times than they have been helpful - and many times the loans were an implied "payoff" for political funding - you can go back many administrations on both sides to get examples.

Awarding merit contracts are different yet. In many cases the fed has set-up bidding with a minimum number of bidders and to the feds credit they try not to sole source when possible. One of the worst problems with the Iraq and Afghanistan wars were how the contracts were awarded. I think in general our government (outside of the intelligence community) is pretty darn transparent and balanced at awarding contracts, funding research and making the research available to industry.

First off, apparently no one is a Republican this year. Second, I didn't call you a Republican. I called the meme Republican. And it is. When one watches Fox News, they often say "the government isn't good at picking winners and losers." That's untrue. The government is good at picking winners. And companies are usually winners just because the government picked them. It's an entirely different question whether the government picking winners is good for society as a whole.

I do believe research in new techs is essential to the economy. And the government is helpful in guiding society away from either monopolies or companies that offer products dangerous to society. Obviously, many believe the oil companies represent both. Some major scientists are now saying it's already too late in terms of global warming, and only via massive, active intervention (versus merely passively stopping the use of fossil fuels) can we halt a process that will destroy humanity. I'm not saying I'm there. But, this isn't something we can keep ignoring and waiting for the market to wake-up.

1) I agree that investing in new research is a good thing. As described earlier. And there are two really good ways to do so, also as described earlier (and probably more good ways to fund research) If direct investment into startup companies and associated unsecured loans is a Republican theme - then I am with them on that issue. It isn't a good idea and most Democrats are also in agreement with that theme as well.

2) Long-term subsidies aren't a good idea - to oil companies or otherwise. That was agreed previously. Although I doubt you could label them as monopolies at this point.

3) The largest growth in the use of fossil fuels will not happen within our borders. We don't have any control over the use of fossil fuels in other countries. It isn't something that the US can regulate.

4) And if you want to quickly reduce our footprint, probably fracking is our best near term choice - but that seems to be causing some cognitive dissonance among environmentalists and strategists - as there are some definite tradeoffs. Still, I would like to see us frack on public lands and export the LNG to replace the coal plants going online.

[Zonkerbl]

"They" are Republicans. And they started the meme to speak about Solyndra and green energy (actually they started it when talking about Carter and solar energy). And what the meme is meant to express to those listening is what I stated above. They want to make it seem as though all subsidies are wasted on unworthy companies, thus cutting funding is cutting waste.

Wait, which is it? Since Solyndra, a few years ago, or since the seventies?

Pretty sure the whole "U.S. government should not be in the business of picking winners" is 1) a standard conclusion of any graduate-level introductory micro-econ course since the 1950s 2) a standard talking point of the Republican party since at least Reagan. That's the difference between us and the Commies, after all.

[Zonkerbl]

Actually the "they" are Republicans, Democrats and Independents.

And "they" were just talking about specific investments as described before in the thread

And you as an economist would recognize the different types of investments and which are most beneficial.

Absolutely not. ABSOLUTELY NOT. I am not nearly that arrogant, and any economist who claims he/she can would be the butt of "delicate crystal balls" jokes from now til doomsday.

I cite the progress made in DNA research as prima facie evidence that picking "green energy" as the next "transformational technology" is completely bogus, not as evidence of my ability to pick winners better than the president.

The market is a process that involves the experiments of thousands of different people. The market determines which of these experiments are successful or not. If it was POSSIBLE for some ivory tower economist to predict which of those experiments would succeed then the Commies, who did precisely that for seventy years, would have whipped our asses good and proper. The fact that precisely the OPPOSITE happened is PROOF that the market is smarter than I am, by a very good margin.

[Zonkerbl]

http://economicscience.net/content/JokEc

Morry Adelman at MIT claims that he heard this at Shell long ago:
“A planner is a gentle man,
with neither sword nor pistol.
He walks along most daintily,
because his balls are crystal.”
Mike Lynch, MIT

[barelyawake]

"They" are Republicans. And they started the meme to speak about Solyndra and green energy (actually they started it when talking about Carter and solar energy). And what the meme is meant to express to those listening is what I stated above. They want to make it seem as though all subsidies are wasted on unworthy companies, thus cutting funding is cutting waste.

Wait, which is it? Since Solyndra, a few years ago, or since the seventies?

Pretty sure the whole "U.S. government should not be in the business of picking winners" is 1) a standard conclusion of any graduate-level introductory micro-econ course since the 1950s 2) a standard talking point of the Republican party since at least Reagan. That's the difference between us and the Commies, after all.

Sigh. As I said, it started with Carter and solar, and became a meme that Republicans (especially Romney) used as a daily slogan over Solyndra. And I have explained, repeatedly now, the difference between the two phrases.

Obviously, there are economists who disagree with you about the beneficial effects of "picking" certain winners -- otherwise we would never do it.

[Zonkerbl]

They're not economists.

I defy you to name one single Ph.D. economist willing to go on record saying, "Yeah, the U.S. should choose certain industries that it favors over others and provide subsidies to it. The economy would be better off."

Just because we do it doesn't mean any economist, ever, has said it's a good idea. The profession has unanimously advised against precisely this for decades.

[Zonkerbl]

I mean, this really burns me. Not only has the entire profession had to fight this lopsided battle against picking winners for decades, but people actually think that, since the lobbyists of the subsidized industries have won the political battle time and again, there must be some economist out there saying it's the right thing to do.

No! The fact that the lobbyists always, always win is PRECISELY why we ALL, UNANIMOUSLY, advise against it!

[barelyawake]

They're not economists.

I defy you to name one single Ph.D. economist willing to go on record saying, "Yeah, the U.S. should choose certain industries that it favors over others and provide subsidies to it. The economy would be better off."

Just because we do it doesn't mean any economist, ever, has said it's a good idea. The profession has unanimously advised against precisely this for decades.

So, it is your contention that the economists who have created these budgets for decades have all always advised to never give subsidies to any industry, and every politician has gone against the advice of every economist on their staff to dole out subsidies? That surely is not the case. Surely, economists weigh the cost/benefit of subsidizing an industry and sometimes say that for the sake of jobs, potential tech, benefit to society and/or profit, that artificially inflating an industry or entity is worth the possible blowback. I've heard economists touting backing green energy, or housing, or various industries on TV, so I know that not to be the case.

[barelyawake]

Double post... Durant to Washington....

[Zonkerbl]

They're not economists.

I defy you to name one single Ph.D. economist willing to go on record saying, "Yeah, the U.S. should choose certain industries that it favors over others and provide subsidies to it. The economy would be better off."

Just because we do it doesn't mean any economist, ever, has said it's a good idea. The profession has unanimously advised against precisely this for decades.

So, it is your contention that the economists who have created these budgets for decades have all always advised to never give subsidies to any industry, and every politician has gone against the advice of every economist on their staff to dole out subsidies? That surely is not the case. Surely, economists weigh the cost/benefit of subsidizing an industry and sometimes say that for the sake of jobs, potential tech, benefit to society and/or profit, that artificially inflating an industry or entity is worth the possible blowback. I've heard economists touting backing green energy, or housing, or various industries on TV, so I know that not to be the case.

Yes, it is absolutely the case. Every, single, time.

"Economists on tv." You've disputed your own statement for me. Like I said, "THAT AIN'T NO ECONOMIST!!!"

[barelyawake]

So, when the lead economists for the administration come on tv, they are suddenly not economists?

[dckingsfan]

Maybe we are all saying the same thing.

1) Investment in research is good - especially if the investment dollars are widely spread out. The more folks working on a problem the better vs. all the eggs in one basket.

2) Government purchases when done in an open and transparent environment with limited sole sourcing is good.

3) Investing in specific companies - especially ones that make political contributions is bad policy.

The only caveat to this is that you have to limit your research $$s to the pie available.

[dckingsfan]

Actually the "they" are Republicans, Democrats and Independents.

And "they" were just talking about specific investments as described before in the thread

And you as an economist would recognize the different types of investments and which are most beneficial.

Absolutely not. ABSOLUTELY NOT. I am not nearly that arrogant, and any economist who claims he/she can would be the butt of "delicate crystal balls" jokes from now til doomsday.

I cite the progress made in DNA research as prima facie evidence that picking "green energy" as the next "transformational technology" is completely bogus, not as evidence of my ability to pick winners better than the president.

The market is a process that involves the experiments of thousands of different people. The market determines which of these experiments are successful or not. If it was POSSIBLE for some ivory tower economist to predict which of those experiments would succeed then the Commies, who did precisely that for seventy years, would have whipped our asses good and proper. The fact that precisely the OPPOSITE happened is PROOF that the market is smarter than I am, by a very good margin.

Then we are in VIOLENT agreement - and you are right, the market is smarter than you AND me.

[Zonkerbl]

So, when the lead economists for the administration come on tv, they are suddenly not economists?

When has a lead economist ever, EVER, come and said that subsidies for a specific sector should be increased?

I can believe an economist said R&D for green technology should be subsidized. I very much doubt that the subsidies for "green investment" in the EPACT (resulting in Solyndra and etc.) were put there at an economist's suggestion, I rather expect that some lobbyist asked for it. Am I wrong?

I can believe an economist coming in and saying the government has a responsibility to invest in basic research.

I can believe an economist saying that for certain sectors to succeed, complementary investments in infrastructure and research must be made in partnership with the private sector.

I can believe an economist did not oppose continuing existing subsidies because the political cost of removing them would be too great.

I refuse to believe that any current, past, or future member of the Council of Economic Advisers would ever say, you know what? I don't believe markets can reach the social optimum. The government needs to intervene and push us away from the market equilibrium, because central planners can achieve better results than the market can. The opposite is the case -- the best a central planner can ever hope to achieve is to reproduce a market equilibrium. That was the economics profession's contribution to the Cold War.

And yes, if somehow you get appointed to the CEA and believe such a fundamentally undemocratic, anti-capitalist thing, I feel confident in saying that you can no longer claim to be an economist.

[Zonkerbl]

AND!

I had the opportunity to see a conference panel where some of the economists in charge of setting economic policy at the White House for the 2008 Obama administration talked about what it was like to go from being an academic at Harvard to setting policy at the WH, and they all agreed that most of their time was spent shooting down bad ideas. They couldn't go into details, unfortunately, but based on what I know I imagine they mostly involved subsidies to hand-picked projects of various influential donors.

[Ruzious]

They're not economists.

I defy you to name one single Ph.D. economist willing to go on record saying, "Yeah, the U.S. should choose certain industries that it favors over others and provide subsidies to it. The economy would be better off."

Just because we do it doesn't mean any economist, ever, has said it's a good idea. The profession has unanimously advised against precisely this for decades.

So, it is your contention that the economists who have created these budgets for decades have all always advised to never give subsidies to any industry, and every politician has gone against the advice of every economist on their staff to dole out subsidies? That surely is not the case. Surely, economists weigh the cost/benefit of subsidizing an industry and sometimes say that for the sake of jobs, potential tech, benefit to society and/or profit, that artificially inflating an industry or entity is worth the possible blowback. I've heard economists touting backing green energy, or housing, or various industries on TV, so I know that not to be the case.

Yes, it is absolutely the case. Every, single, time.

"Economists on tv." You've disputed your own statement for me. Like I said, "THAT AIN'T NO ECONOMIST!!!"

Are you saying economists were unanimously against bailing out the auto industry?