If Bastiat was alive today, he would run circles around politicians and economists like Krugman, while at the same time being ridiculed as one of those crazed nut-case libertarian. He will also generally being unpopular. And he was unpopular and unknown in his time. I mean, this man had braved the French Revolution and risked getting his head chopped off.
What he did for us is to write pretty good fables and stories teaching us a thing or two about economic fallacies. That's the whole reason why we still read him today. That what have earned him legion of fans.
But, in this era and age, some of the things he said would still be seen as heresy.
Breaking windows(or digging holes and filling up again) is still seen as smart by some crazy economists.
The other day, I stubbornly argued against wars as stimulus on the basis that it's a broken window fallacy on hacker news. I got lot of karma points alright, but my opponent was pretty damn persistent about wars being a smart idea.
It's hardly only Krugman who's in favor of economic stimulus; most orthodox neoclassical economists believe in at least some role for fiscal stimulus, including those who lean right. For example, The Economist has generally supported some degree of stimulus programs and warned against too-quick budget reductions plunging economies back into recession, despite usually being against government intervention in the economy.
Where I'll agree is that it does seem preferable for stimulus spending to actually produce something useful, preferably something infrastructural that produces long-term value, as opposed to just having people dig holes and fill them back up again. For example, the Works Progress Administration in the 1930s produced a bunch of schools, bridges, hydroelectric dams, national park trails/structures, etc., many of which we still use.
That was one of the criticisms of the 2009 stimulus plan, which in the interest of short-term stimulus ended up spending a bunch of money on things without any real lasting value. E.g. instead of building $20b of high-speed rail, we spent $20b on repaving roads.
The problem is that its always something that people are unwilling to pay full price for with their own money. so the actual value is somewhat unknown. But there are so many distortions and subsidies, one cannot really tell with a lot of things.
One thing is certain though. When government spends money, it borrow it or take it by taxation or inflation. So it really just changes who is spending it and the desirability of the spending.
Desirability drops because people spend on thing or invest in things that are of real value to them, where as government puts money where it politically popular.
I hear the government is going to be giving two solar companies $2 billion that will create 2000. That's $1 million per job. And on a technology that is not all that competitive yet.
But don't worry. Government knows exactly what technologies will win out. And if it doesn't, it will spend whatever is required to make it look like its winning.
Why are you so hostile to research that sees production use?
The theory, which is increasingly being borne out, is that economies of scale will kick I bun if you subsidize it.
But even if not, it's small-scale research, and extremely important. But politicians need a message that sells, and talking about the complexities of solar panel research and job creation that motivate this endeavor just leaves people's eyes glazed over.
We don't know what technologies will win out. When money is thrown at one for political reasons, its quite possible that other more viable technologies don't get developed. And if an alternative like solar or wind is truly viable, it will succeed.
What we need to do is make sure that all of the costs of oil are paid for by its users. We shouldn't be spending hundreds of billions ensuring a cheap supply with foreign policy. All we're doing is hiding the true cost of its instability.
And if things like oil are creating other indirect problems, its use should be taxed to pay for those costs. That will allow alternatives that don't have the same problems to compete.
But to pick a solution the way the government does and throw money at it is a wasteful strategy.
They're doing the same thing with electric cars. Both the federal and California governments will give thousands in deductions for this particular solution. This hides the true costs. And we ignore that the additional electricity probably comes from burning fossil fuels anyway.
Most of the technologies that created the wealth we enjoy came from private risk taking, not politically fashionable government money spraying.
Divining the future is very difficult and best done with distributed intelligence with a great diversity of perspectives all competing with each other, not with any one particular brain installed in Washington.
Solar research will dramatically kicks in as soon as oil become too expensive. Moreover, solar productions will kick in when it become too expensive to run our economy on oils.
There is no need for solar researches until then. We could use that money to spend on other research programs, such as space exploration, semiconductor research, or even water conservation research. However, we don't know which to fund. So we end up with a government that more or less redirect the path of technological development, not so much advance the overall state of technology.
There is a free lunch! It's the other costs of fossil-fuels (political instability, pollution, global warming, risks of environmental disaster) that are not reflected in the price of oil and so are unable to influence development of energy alternatives!
There is no free lunch. Unless of course the government is providing it.
It is the government spends hundreds of billions keeping oil cheap and stable. And its doubtful that its efforts to do so actually work and may actually make things worse. We're fighting 2 wars over this right now.
I say let the market work and stop subsidizing oil.
And we should also stop subsidizing the automobile as well. If we paid the real costs of roads directly, we'd have made much better, less wasteful choices.
Regarding pollution, it is the proper function of government to protect individual rights, including the right to breath and not have pollution dumped on your property. And it is the proper role of government to keep people from destroying our ability to live on this planet. Its just another form of self defense, which is your right.
It is not, however, our right to shift the costs of our individual choices to other people. And that is what our government has been doing in so many areas. Doing it even more is not the answer.
I meant the question seriously and your answer was informative.
However I suspect your example really stems from an argument that "common property" like roads should be minimized and that a private owner would better price road use. I think libertarians would not argue that the government should create a fancy new road-taxing system. Correct me if I'm wrong.
Many other externalities are harder to privatize. For example social costs/benefits of hiring or firing employees, of providing employees with insurance or not, of destroying local businesses with everyday low prices and shipping the proceeds to China, of promoting education and/or research, of taking advantage of peoples' poor choices in credit use, of selling highly-addictive drugs, of polluting, of destroying the Gulf's tourism and fishing industries, of global warming, etc. I doubt libertarians advocate private ownership of the atmosphere.
I certainly don't like the idea of the government micromanaging every conceivable, nebulous externality, but I think there is a time and a place for regulation, taxes, government investment, government subsidies, etc. as tools for dealing with the most troublesome systemic problems.
The time and place for government action is when individual rights are being violated. A right is something that authorizes the use of force to defend it.
You have the right to live, to breath and to own property. You're free to buy insurance, promote education, bargain with people who are dumber than you, use substances or sell them to others.
You have the right to hire and fire, and capriciously change where you buy your gasoline.
But you don't have the right to force others to fund your pet projects or make their decisions for them if you think they're being dumb. And we gain no special right to do so just because a group of us get together and decide to do so.
Our system is stronger specifically when individuals are free to disagree and to try many competing ideas without a central approving authority.
But, yes, some things are inescapably shared like the atmosphere and we must cooperate on protecting it.
Your take on government's "time and place" doesn't resonate with me. I value many functions of government that I don't consider "rights" such as antitrust enforcement, insider trading prosecution, radio frequency allocation, long-term research funding, deposit insurance, unemployment insurance, driver licensing, pharmaceutical testing.....
I also don't see completely unregulated industry as remotely tenable. I suspect that wealth and power would rapidly concentrate in a small number of companies (and probably individuals) and competition would be minimal. While I don't exactly understand how the interplay between consumers, workers, share-holders, and corporations would work in that world, I suspect it would be something like a less democratic, less accountable, less liberty protecting, government.
I think more can be accomplished when people cooperate voluntarily.
There is nothing that says people cannot voluntarily enter into contracts to cooperate on many things often seen as things coercive governments must manage. For example, one can enter into agreements with other property owners in an area that could govern all kinds of things. No one need be forced to do anything, other than keep their agreements.
Freedom is not being free from all commitments and all arrangements. It is merely being from having them imposed upon you by physical force or threat of it.
But some of the things on your list no one would ever agree to. For example, paying someone when they don't have a job, something they have a lot of control over and which simultaneously gives them the means to not have to take a job. We're better off if people learn to save their money. Most can certainly do that.
Likewise, deposit insurance takes away all reason to evaluate where you put your money and has certainly subsidized a lot of reckless banking. I think people who make decisions should bare the risks. People who have nothing to do with it should not be forced to bare such risk.
Other things on your list would continue under a more private system. People would still fund long term research; companies do that now too. Perhaps you've heard of Xerox PARC, HP Labs, IBM and Bell Laboratories.
And if you've got a private highway, you're going to require people know how to drive on it. Why wouldn't you? You lose money when there are accidents. You'll probably even come up with a way to keep drunks off of your road.
The wealth concentration you fear is frequently empowered by the very government you think prevents it. The corporations control the government now.
Who handed the lands and right of ways to the railroads? Who stood by as they lied to farmers to get them to move out there where they only lifeline was the railroad? Who told BP their liability was limited to $75 million? Some might even go as far as saying it is no coincidence that the rise of big business parallels the rise of big government.
And as for being less liberty protecting, I really don't see how a government that fiercely enforces individual rights will not be protecting them.
Just because things have been done a certain way doesn't mean things can't be done in a better way. But I certainly don't expect people to drop the current approaches without having those alternatives being demonstrated as better.
I see things as very incremental. A lot of things have gotten bad because of whole series of less than optimal choices. We can certainly move towards better systems incrementally.
I feel obligated to respond since you put so much time into your response. However, I'm not going to follow this thread further so I'll resist the urge to get in the last word.
I think our debate can be summed up as follows:
I believe that government has a role in fixing/preventing systemic problems, preventing private entities from engaging in harmful social behavior when the market is inadequate to do so, and performing socially important functions that the market does not incentivize. I certainly don't think the government should tackle every conceivable problem - we have a democracy to decide. In practice, I think the costs of the fix is high enough in many cases that it is preferable to live with the problem. (However, this is a practical observation rather than a determination based on principle.)
I think you would say that the government has no authority to meddle in those issues and must rely on coercion to do so, always gets things wrong when it does, the purported benefits of regulation can be achieved by voluntary agreements between private entities, and that "important functions that the market does not incentivize" is an inherent contradiction.
I think there is a place for both! The latter is certainly more politically tenable ;). But seriously, funding research doesn't need to be thought of as "picking winners." For example, I think the NSF does an admirable job of funding longer-term research using peer review to decide which ideas are funded. Some wild ideas are funded when proposal authors can make a good case for their research, others are not. Many ideas fail, but the externalities of the research process are positive - Ph.D. students learn to be effective researchers and many will contribute later in industry.
But I agree with much of your statement:
1. Governments shouldn't pick the winners, particularly too early in the process. (but I don't have a problem with funding promising ideas to promote their development)
2. I also agree that a fossil-fuel tax would be a good way of enlisting the power of private industry to find good solutions to the problem. But in the short term, it would surely draw the ire of those unaccustomed to paying for these externalities.
This is incorrect, and as a counter-example I point the fact that millions of dollars every year are "invested" towards perpetual motion machines.
There are three large organizations with enough funding to construct, say, a super-collider; government, church, and corporations in order of influence and funding. So since the pot is bigger, it is simpler for someone to apply to NSF for funding than petition MegaCorp. But yet many large corporations fund ongoing basic research. New directions are been explored in networking theory, mineral exploration, and medicine every day.
Perhaps the main difference is that governments spend significantly towards weapons development, and as a corollary protection from new weapons. This has produced innovations such as nuclear power, biological engineering, ARPANET, and rocketry. Corporations are generally excluded from weapons research unless granted specific permission from a government, and hence were excluded from first developing these innovations.
And if you focus in on technologies championed by politicians instead of those going on deep inside government labs to address real strategic needs, you see even less success.
Government organizations can and do innovate, but like you said, its usually for defense purposes. Which is fine with me. Like many people, I don't enjoy invasions or nuclear strikes.
When APRANET was developed, I think it was more of a side project than a campaign issue.
The folklore that I know is that ARPANET was created to provide communication channels across the US in the event of nuclear war. I should find a reference for this.
No, it just means less imaginative research. And more research by people good at filling out paperwork and kissing ass. These are not the iconoclasts for the most part.
What he did for us is to write pretty good fables and stories teaching us a thing or two about economic fallacies. That's the whole reason why we still read him today. That what have earned him legion of fans.
But, in this era and age, some of the things he said would still be seen as heresy.
Breaking windows(or digging holes and filling up again) is still seen as smart by some crazy economists.
The other day, I stubbornly argued against wars as stimulus on the basis that it's a broken window fallacy on hacker news. I got lot of karma points alright, but my opponent was pretty damn persistent about wars being a smart idea.