Friday, August 05, 2016

Waste and debt

The mantra used to be that the antidote for bad cost-benefit studies is good (properly done) cost-benefit studies. But Bob Higgs remains skeptical. He invokes the "first do no harm" principle and notes how hard it is to meet that standard -- no matter what the estimated costs and benefits are.

But we now live in another world. Whether it is Clinton, Trump, Sanders or Obama, they are fond of discovering (and championing) free lunches (trade protectionism, free college, banning immigration, overtime for everyone, free child care, energy independence, etc., etc., etc.).

The locals in my part of the world are not to be undone. Friend Brad H. notes that the Los Angeles Economic Development Corporation has discovered the best deal yet: Raise the sales tax by one-half cent and "put billions back into the economy". How does that really work? There are no opportunity costs. In fact, costs are benefits. Spending is a benefit.
Light rail, subway and bus rapid transit construction projects that would be funded by the tax plan would result in $51.1 billion of economic output, while another $28.2 billion would be generated through freeway and highway projects during the first 50 years, according to LAEDC analysts.
But even high authority (in this case J.M. Keynes) said that "whenever you save five shillings, you put a man out of work for a day."  The spending sentiment still resonates. Spin it with talk of less traffic, less carbon, etc. and it's off to the races.

The great two-fer these days involves public projects that denote more waste and more debt. Debt is justified if and when the projects funded contribute to growth. But these are not the sorts of projects that politicians place on the ballot these days. Quite the opposite


The list of free-lunch fairy tales is long and growing. This one surely belongs: "The All-Time Regulation Record."  The slowest post-war economic recovery speaks for itself. 


The NY Times includes "A Low-Growth World ..." on this Sunday's front page.  No mention of the elephant-in-the-room-all-time-regulation-record. This goes on here and abroad and explains low growth here and abroad. Some years ago, Mancur Olson published The Rise and Decline of Nations: Economic Growth, Stagflation and Social Rigidities.  The "mystery" was solved by Olson some years ago.