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Comment by qeternity | Hacker News Reader

> Money well spent in my opinion. Tesla will pay this back with their taxes (etc) within a few years.

How do you arrive at this conclusion?

The Tesla Berlin car factory alone costs 4 billion euros. A large part of this sum is going to local construction companies. So in some sense, they already paid for it.

What? That’s not how this works.

If the government gives me €1B and I go buy gold with it, just because I’ve spent it locally does not make it a productive use of proceeds.

That's because you bought gold rather than purchasing productive aspects of the economy, which goes back to labor.

Buying up stores of wealth instead of purchasing services is a very bad way to stimulate the economy.

You’ve missed the point entirely, as that is precisely my point. Merely hand waving it away and saying “it was spent on local construction companies” is not a sufficient argument.

It takes a hell of a lot to justify these sorts of investments and usually the ROI doesn’t materialize for the State.

What the other person meant, I think, is that when you buy services from the companies, those companies then pay a 20% tax on profit to the state, additionally, all the salaries they pay to people also end up ta ed at 30-40%, so much of the labor cost will be returned to the state and only raw materials won't (but if they are sourced locally, the suppliers will also contribute some taxes). Don't know the exact division between labor and materials, but my armchair guess would be that 20% of the cost of factory will end up as tax paid to the state.

I know what they meant.

That doesn’t mean you can just argue a point without any sort of justification.

I think GP is prefectly well aware of what was meant, and their point still stands - you need to do a lot of careful analysis to actually claim any ROI for these kinds of government handouts, and the burden of proof is very firmly on those claiming the benefits. The history of these things is overwhelmingly that in the final tally, actual benefits fall far short of break even.

I don't feel comfortable with people just claiming that there's a positive ROI, but I feel the same about claiming "usually the ROI doesn’t materialize for the State" without anything to back it up.

>The history of these things is overwhelmingly that in the final tally, actual benefits fall far short of break even.

Do you have some source for this?

To expand on your point, the "ROI" for a state doesn’t have to be strictly financial. It can invest to improve employment rate, to establish itself as a production/business hub, etc.

No. All of those things can and must be translated into ROI. This is the only way to compare investments. Maybe there’s a different use of these funds that would yield greater impacts in those areas you mention.

I understand your point. But: fiscal balance is merely one of many goals a state has when it invests. There are also environmental concerns, questions of social equality and wellbeing. In other words: a state is not (only) a business. Not everything shows up on the balance sheet.

No, you don’t. I’m saying all of those things have return functions. Financial ROI is just one metric. However you define your environmental returns, you can calculate an environmental ROI and then compare that across projects.

Unfortunately the track record of government spending is pretty bad. I'd rather have that money go towards private entities with good a track record, to find solutions to things like the climate crisis and pollution.

You're right, a deeper analysis is probably required and hopefully was done. In general though, I think any investment that develops the means of production of a country is well spent. Having the capabilities and equipment is a huge long term boon I think.

Like I'm not sure what else would money be better spent on then education towards a knowledgeable workforce and the means of production to produce and service people.

Within that category, I agree there is an opportunity cost, like is battery manufacturing the right thing to invest in compared to other products or services? That's a much harder thing to predict though.

> I think any investment that develops the means of production of a country is well spent.

Hyperbole such as this is why we end up with so many bad policies. You can be pro-investment and also expect that governments focus on good investments.

Not all investments are not good investments.

Can you elaborate? Why are batteries a bad investment?

Because investment theses aren’t as simple as “thing X is a good investment”.

You don’t start with the assumption it’s a good investment and try to disprove it.

You do the opposite, and with some sort of analysis. It’s not that batteries are good or bad. It’s whether this amount of capital invested in batteries with this company and this business plan at this cost of capital is a good investment.

It's not hyperbole, I've refined it down to a category of investment I'm saying should be prioritized. Now within that category I acknowledged that we should look at the opportunity cost and try to predict what would be a good investment, but that's not a science, you can only do so much analysis, eventually you need to decide and there's always a risk involved.

Wages

Capital Investment

Corporation Tax

What sort of thesis is this? Does anyone bother to even do back of the envelop math anymore before having an opinion on something?

I asked for something very specific for someone who expressed a very confident opinion.

Did you even read the article?

You don’t think a German government agency would do cost-benefit analysis on supporting a project ?!

I think the benefits of FDI are pretty well established.

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