Hacker News Reader

Comment by dv_dt | Hacker News Reader

Why would additional spending cause sluggish economies? By definition added spending increases economic activity. You can debate the secondary effects of it but spending to gdp is more or less a direct line.

The populations are getting older, health costs will tick up, so you can expect to increase those costs. But immigration is discouraged so you have to keep your workforce healthy

View on HN

Isn’t the idea that the money and resources have to come from somewhere?

Raise taxes or debt for the monetary side. Divert workers and other resources on the implementation side. Both of those might be better used by the private sector

When a Western government (or other state actor) decides to build something — public housing or satellites or a packet-switched network, for example — they don’t actually build it themselves. Governments don’t own construction companies and electronic design companies and research labs. The money goes to private actors who do the work.

So “divert” seems misleading. If the American government hadn’t “diverted” funds to build ARPANET half a century ago, we’d probably be stuck with the equivalents of AOL-style walled gardens instead of a single Internet because that’s the kind of network that private interests wanted to have.

... and this is called the "broken window fallacy".

You're right in that you remark that it's less bad than it initially seems. Some wealth is indeed recovered when the broken window is repaired. However everyone is by necessity worse off than if you didn't break the window in the first place.

https://en.wikipedia.org/wiki/Parable_of_the_broken_window

It is not additional spending. It is the share of total spending controlled by government growing at the expense of share of spending being controlled by market actors like consumers and private firms.

This leads to less effective allocation of capital, because large monopolistic government bureaucracies don't have the structure or incentive to perform anywhere near as efficiently as market actors.

I think there is data that says the opposite (particularly in the context of Piketty), there is a reduction of efficiency when too much is controlled by overly concentrated capital structures.

The data all shows that higher government spending is correlated with lower rates of economic growth.

This study both provides data and provides a number of citations to other studies which provide data on this correlation:

https://web.archive.org/web/20170821004405/http://ime.bg/upl...

If you believe that the best possible allocation of funds is through government spending as opposed to capitalism, yes. That's an exercise in begging the question, though, and historical support for the premise is uneven at best.

Maybe my brain has been too rotted by listening to Noam Chomsky in my youth, but government spending and capitalism are two sides of the same coin. Everyone in washington is a capitalist, maybe withstanding 1-2 representatives. Large corps are constantly communicating with our leaders, far more frequently than their private constituents. To think that there is some secret, powerful office of the government where they are trying to dismantle capitalism through the use of welfare is a bogeyman. Welfare is there to prop up the ideology of capitalism as it smears against the rough road of reality.

Capitalism is primarily concerned with production, not welfare. Its central dogma is that society's welfare is naturally maximized along with its productive capacity, but there is essentially zero acceptance of that point of view anywhere on Earth, certainly among those in power.

Arguably the optimal operating point for an economic system, from a GDP point of view, is to maintain just enough public spending to keep a Robespierre from arising from the unwashed masses. Public spending beyond that is an unproductive waste.

Most of us would agree that sacrificing everything else on the altar of GDP is not what we want to do, though, so the (perfectly legitimate) question of where the compromises need to be made is always going to be on the table.

> Everyone in washington is a capitalist

in the sense that Nancy Pelosi and others are enriching themselves through insider trading, I guess

Reply on news.ycombinator.com