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December 17, 2009

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George

2012 can't come soon enough.

jj mollo

Yeah, I believe that, but only if someone is paid to replace the windows. In Philadelphia there are entire houses, houses that could be rehabbed and sold for a profit, that sit idle because of red-tape, deceased owners, jailed owners or irrational behavior on the part of departed owners. Broken windows? I pass houses every day where the wind blows through the front and out the back. And people live in some of them. The stock of substandard or deteriorating housing as well as abandoned properties in this city is distressingly high. And yet, Philadelphia is a success story compared to some places ... like our sister city across the river.

Older cities, and the people in them, have been shamefully neglected by our inept government officials, at all levels of government. The answer lies in reorganizing government along more rational lines.

We already had the argument about Keynsian theory. Keynes claimed that we could do something useful with the money, but even if we just had people dig holes and fill them up again it would be an improvement over letting them sit idle. Government has the responsibility to employ people when the economy is broken. If it does not do so, then the economic and social consequences of their idleness will be far more severe than simple vandalism.

Expecting that a new President will solve our problems is insanely optimistic. Market forces will probably bring economic recovery and economic growth will eventually overshadow the deficit. But the aimlessness of our industrial planning, the disregard for infrastructure, the disregard for human capital, the growing imbalance in wealth distribution will still be there, and there will still be a dysfunctional government to oversee the mess.

Frank Warner

It doesn't help an economy to break windows on purpose. That's waste. Because someone has to be paid to fix them on an irrational timetable, it's a drag on real economic progress.

Where windows are not repaired, there's usually a reasonable explanation. They're not needed or wanted immediately. The invisible hand is working.

The visible hand, breaking then fixing windows, is a criminal hand, violating the laws of economics, society and common sense.

The alternative is not to let people sit idle. The alternative, with a safety net, is to let the economy create real jobs that fill real wants and needs.

After enough window breaking, clunker scrapping, unnecessary new prisons and corrupt government spending, we'll see many more idled, perhaps permanently.

jj mollo

There are many aspects of economics theory that seem counter-intuitive.

Yes, of course, breaking-then-fixing is not the optimal policy, but compared to what? Keynes was comparing it to inaction. You can always argue about the virtues of various spending programs, but during a period of high unemployment action is required to keep people working and spending. A shock to the system disrupts the normal flow of money. You need to restore normalcy. If nothing is done, layoffs lead to lower incomes, lower incomes lead to less spending, less spending leads to more layoffs. The cycle must be broken, and it is best broken before people are starving on the streets.

Scrapping clunkers is only a loss of wealth if you ignore the externalities. You might not agree with the wisdom of the investment, but under the accounting norms of the party in power, the social cost of certain clunkers exceeds the private benefit, and the Administration was willing to bribe owners to cease and desist. The fact that this program could be used to maintain a level of employment based on car sales was a critical additional benefit.

Corrupt government spending is bad on principle, because it bypasses the protocols of national consensus. Economically, however, such programs have varying levels of benefit. We would not normally build a giant bridge to a small coastal island in Alaska, but some people stood to benefit. If there were more potential traffic, maybe the project would actually have been cost effective. A lot of these pork barrel projects are minimally cost effective. Some might even represent the best use of our dollars. Not likely, though. When the government is looking to buy up excess capacity, however, as it should during recession, it is more important to spend the money quickly than it is to fund better projects that take longer to mature.

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