Trains: The Moral Equivalent of Trains
SNCF Train à Grande Vitesse, Paris (wikimedia)
Noam Scheiber has an interesting article in The New Republic laying out in some detail why even though the recession may be over real recovery is likely to take a long time. The basic issue is debt overhand. During a bubble, most people and firms began acting as if they owned lots of very valuable assets against which they could borrow money. Then the bubble pops, and it turns out that everything everyone owns isn’t worth as much as they thought. But their debts still are! That means that spending relative to income needs to become a lot lower than it was during the boom, and stay a lot lower for quite some time until things can balance out again:
Absent a strong demand for exports, the most plausible way for a country to crawl out of this kind of recession is for households to keep paying off debt until they can afford to spend again. Indeed, as Paul Krugman argued in a recent lecture series at the London School of Economics, the reason the United States didn’t slip back into depression after World War II–something many economists feared at the time–is that, 15 years after the initial crash, people had finally put their finances in order.
The trouble is that fifteen years is too long a time. What’s needed is something to spark an investment boom. Scheiber wants that to be industrial policy:
So far as I can tell, the only solution to the underlying economic problem is something that’s been a dirty word in Washington the last generation or two: industrial policy (that is, an active government role in the development of certain industries.) In his LSE lectures, Krugman quipped that “if someone could invent the 21-st century moral equivalent of the railroad, or actually even the moral equivalent of IT in the ’90s, that would help a lot.” I agree–that would help a lot. But waiting around for this to happen seems risky when the alternative is a decade of stagnation.
He thinks industrial policy can solve this problem. I think this is a bit like solving your problem by assuming a can opener. The problem with industrial policy isn’t that good industrial policy wouldn’t be a good idea, the problem is that nobody knows how to do good industrial policy on a systematic basis. If you scour world history for examples of industrial policy paying off you’ll find some, but you’ll also find tons of failures. Simply wanting it to work doesn’t resolve that issue.
That said, couldn’t the moral equivalent of the railroad be . . . the railroad. High-speed passenger rail is not, in fact, a brand new technology but from the perspective of the United States it might as well be. After all, we currently have exactly zero miles of true HSR coverage in this country. None. And it’s not even remotely a speculative technology it works perfectly well. It’s just expensive to build. Very expensive. But insofar as the idea is actually that we’re looking for very expensive medium-term investments that’s more feature than bug. For that matter, there’s also the very old and extremely proven technology of intra-city heavy rail, i.e. metro systems. Digging subway tunnels underneath developed portions of growing metropolitan areas, packing stations relatively close together, and allowing greater density to arise near the stations is an absolutely proven strategy for driving fixed investment and spurring growth. Again, the reason not to do it is that it’s extremely expensive. But if the view is that we ought to spend huge sums of money on something, this strikes me as more promising than hoping the government can direct future technological development.
Alternatively, Ryan Avent hopes Chinese demand can save the world.
56 Responses to “Trains: The Moral Equivalent of Trains”
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August 14th, 2009 at 4:26 pm
Scheiber is exactly right – in fact, that is what I’ve been saying.
And the fact that HSR is expensive is a plus. We need lots of BIG projects that are very labor-intensive.
Now if we also make tax rates highly progresive and put punitive taxes on finance, we are geting close to my perfect solution for recovery.
August 14th, 2009 at 4:28 pm
The posts today are some of the best I’ve seen in some time on this blog. Seriously.
August 14th, 2009 at 4:28 pm
It’s amazing what WWII did for Americans’ balance sheets. Everything was rationed and there was plenty of high-paying work to be had (at least in the cities – Chicago was packed to the gills with workers, who enjoyed a ridiculously low unemployment rate). But then, almost no private automobiles were built during the war. Almost no private housing was built. There wasn’t just spending power at the end of the war, there was also huge pent-up demand for stuff. Not sure there’s anything remotely like that today.
August 14th, 2009 at 4:33 pm
I’ve pointed this out before, but I’m not sure how labor-intensive subways and high speed rail are. The thing that you need for HSR is a long, straight right-of-way without grade crossings. This does not exist between, say, NYC and Chicago, or LA and San Francisco, or whatever.
So if you want to do HSR right, you have to use eminent domain with a heavy hand. And even then, you have to spend gobs on compensation. Maybe now is the right time to do that – land is a bit cheaper than it was, and knocking over a few houses might actually be a good thing. But still, I would like to know how much of the money would put people to work and how much would merely compensate people for their land.
Incidentally, I don’t think we could possibly muster the money necessary to do HSR properly at this point, at least between most big cities. But I really would love to be proven wrong.
August 14th, 2009 at 4:35 pm
Re “The problem with industrial policy isn’t that good industrial policy wouldn’t be a good idea, the problem is that nobody knows how to do good industrial policy on a systematic basis.”
————-
Oh, bullshit.
What do you think the Manhattan Program was? How do you think we defeated the Soviet Union?
We have TONS of problems as a Nation — the government just needs to address them.
Start by having a debate among experts re what new energy sources we should develop.
This idea that a bunch of greedy assholes off in some corporate suite can plan better than a council of technical experts — and that said greedy assholes will look out for the interest of the common citizens better than civil servants –is a fucking crock.
A Big LIE — put out by Republicans, pundits, intellectuals, and economists who get paid to lie.
Don’t give me bullshit about the Soviet Union — Russia was WAY behind the eightball in 1945 –yet she fought the USA and NATO to a draw and preserved her independence. There are damm few MAJOR CAPITALIST Powers that can make that claim. Great Britain and Germany are our whores and we tolerate France’s pretensions because she amuses us.
We are a nation of 300 Million people whose LIVES depend upon a highly complex economy. The idea that we can survive using a government approach resembling a pack of pig farmers selling stock at the county fair is moronic.
We have had CENTRAL PLANNING FOR THE PAST 50 years — the US Congress’s horsetrading and pork slicing is not greatly different from that in the USSR’s Politburo. The only question is WHO does the planning and for whose benefit.
A politican has to get your vote. A plutocrat doesn’t give a shit if you starve — in fact, he would prefer that you did so.
August 14th, 2009 at 4:40 pm
Railroad, hell. Let’s build a space elevator.
August 14th, 2009 at 4:40 pm
minderbender Says:
August 14th, 2009 at 4:28 pm
It’s amazing what WWII did for Americans’ balance sheets. Everything was rationed and there was plenty of high-paying work to be had (at least in the cities – Chicago was packed to the gills with workers, who enjoyed a ridiculously low unemployment rate). But then, almost no private automobiles were built during the war. Almost no private housing was built. There wasn’t just spending power at the end of the war, there was also huge pent-up demand for stuff. Not sure there’s anything remotely like that today.
=============================================================
You beat me to it! The reason people had their finances in order was forced savings of high wages during the war. As you pointed out, there was little available in terms of discretionary spending and most people were forced into buying War Bonds as an investment.
After the way, as you pointed out, there was huge pent-up demand for consumer goods and savings to buy them with. Add to that the fact there was little competition from foreign manufacturers as their factories were destroyed by the war. No wonder the economy boomed
August 14th, 2009 at 4:41 pm
Not familiar with the “Manhattan Program,” but the Manhattan Project refers to the development of nuclear weapons, not industrial policy.
August 14th, 2009 at 4:51 pm
Not familiar with the “Manhattan Program,” but the Manhattan Project refers to the development of nuclear weapons, not industrial policy.
Maybe Don was thinking of the Marshall Plan.
August 14th, 2009 at 4:52 pm
WWII is a decent example of industrial policy.
American industry shifted from consumer goods(like cars) to war material (like tanks and planes) rather quickly and effectively and a new workforce, with many women and blacks, was created. There were government controls on most activity, including wages, prices and work conditions.
But then there was common purpose, and bitching about high tax rates and rationing was considered unpatriotic.
August 14th, 2009 at 4:52 pm
No.
While I think it’s a good idea, it won’t yield anything like the increased productivity of the original railroads or information technology. It will merely result in a small amount of energy savings and slightly better land use. Those are good, but not world changing.
This isn’t stimulus. The high price tag isn’t a feature. The only feature we would want in this “Moral equivalent” is increased productivity or a potential for a lot of profit spread broadly. High price is not a feature, it’s just not an obstacle.
I’d say water and electricity distribution improvement has more potential than high-speed rail. The water/sewer infrastructure is going to be rebuilt. We can either have a coherent plan to do it, or do it without one.
Significant investment in exportable means of clean energy production would probably be the best avenue for creating a lot of jobs that actually generate wealth.
August 14th, 2009 at 4:55 pm
We should look at upgrading the freight railroads to get trucks off the road.
Most east-west truck shipments go on flatcars. We should do the same on the East coast. I-95 and I-81 on the East coast are clogged with trucks that cannot fit on the freight railroads due to infrastructure problems.
It will reduce the carbon footprint of the transportation, especially if we electrify the rail lines.
As an additional note. I live in DC, and have good rail passenger service to New York, but I take the bus because it cast $20, rather than over $100 on Amtrack. Until this price difference is reduced, upgrading the track will not make me take the train.
Bookwormhole.net — over 14,000 published book reviews.
August 14th, 2009 at 4:55 pm
we’re looking for very expensive medium-term investments
In your private life, do you consider ‘expensive’ to be an actual virtue (as opposed to a possible signal of value)? Given that you’ve already been clued in to the debt overhang, why are you advocating more debt? Or does it magically become good debt when the government holds it instead of the consumer?
August 14th, 2009 at 4:56 pm
Sorry Matt all countries have an industrial policy. But in the US thats treated as a dirty word ans so we don’t discuss it. But NAFTA is part of an industrial policy as are copyright laws as are farm subsidies. The US just refuses to acknowledge what its doing.
August 14th, 2009 at 4:57 pm
… exportable means of clean energy production?
I’m all ears.
August 14th, 2009 at 4:58 pm
There’s also the danger that whatever the new hotness is would end up generating another bubble.
August 14th, 2009 at 4:58 pm
My understanding is that industrial policy refers to the attempt to anticipate emerging industries and capture them domestically with strategic subsidies, protectionism, etc. Only in a very broad sense, I think, can the US government’s WWII procurement of military supplies, rationing of consumer goods, etc. be termed “industrial policy.”
August 14th, 2009 at 5:00 pm
I am with Njorl. The smart grid and alternative energy have a much greater transformative capacity than HSR. I’d originally hoped the stimulus bill would’ve been much more focuses on that than, you know no focus.
August 14th, 2009 at 5:10 pm
A lot of people think only of New Mexico when they think of the Manhatten project. Oak Ridge qualifies as industrial policy. It was an enormous industrial project, employing over 70,000 people and using as much as 30% of the nations electrical capacity at times.
August 14th, 2009 at 5:12 pm
The keys factors for recovery are:
-Create jobs
-Create enough activity to offset the decline in private activity
-Do work that permanently improves people’s lives (clean water, air pollution abatement)
-Do work that can be followed up with new improvements (electric grid, urban transit)
-Correct current economic distortions (income distribution, biases favoring capital over labor)
August 14th, 2009 at 5:12 pm
Li”BART’erians will rail against this idea.
August 14th, 2009 at 5:13 pm
Or does it magically become good debt when the government holds it instead of the consumer?
Essentially, yes. By coordinating means, the government can in effect pay off individuals’ debt by incurring their own, and the goods and services the government bought from individuals by paying off the debt spur growth in a way that individuals acting alone would not be able to attain, i.e. by building railroads.
So the argument goes.
August 14th, 2009 at 5:14 pm
Windmill designs that can be unobtrusively implemented near usage sites – cheap durable solar panels – safe, small nuclear plants designed to replace coal burning power plants on-site – things like that.
August 14th, 2009 at 5:23 pm
Interguru:
Track clearances and upgrades aside, to take trucks off the road then you’re going to have to make it worthwhile to shippers, just like with your $20 bus ticket.
Intermodel makes sense when you’re shipping from L.A. to Chicago but not so much when you’re shipping something that can get there in one to two days by truck because you eat up time when unloading/loading the trailer, plus dwell-times in terminals. This might work on getting trucks off of I-95 with a Jacksonville-New York long haul. But it would be useless on getting trucks off of I-81 or something traveling less than 500-800 miles
Especially since to get a rail shipment from Virgina to the Canadian border would be hard to do without going through Philadelphia or New York and Washington.
August 14th, 2009 at 5:45 pm
Industrial policy does not refer to public-sector industry, or even to policies like workers’ comp or pension regulation, though those are policies that hugely affect industry. Industrial policy involves fostering particular industries seen as valuable, perhaps because of technological spillovers or employment of particular categories of people (engineers or whatever). So the strategic petroleum reserve, despite its importance to industry, is not part of our industrial policy. Technology “incubators,” however small and ineffective, are core industrial policy.
I guess it’s a misleading term, in a way. Some people see it as a pseudo-intellectual rationalization for protectionism, so maybe the whole point was to find an innocuous-sounding term.
August 14th, 2009 at 6:24 pm
What really is the long term return on the expense of high speed rail and subways? The idea of being able to jump on a train here in Milwaukee, Wisconsin and take off at 180 MPH on a train to New York or Seattle sounds great. There’s no doubt in my mind that it’s easier to travel by rail than airplane and if long-distance runs (like from the midwest to the coasts) could be made in less than a day (to the east coast) or one overnight (to the west coast), intuition says everyone would love it.
But no one is even talking about these kinds of routes. All I hear is I might be able to go from Milwaukee to, I don’t know, Kansas City (why I’d ever need or want to go there I’m not sure) in a few hours; big deal.
Voters here have no vision for the grand schemes any more. We’re stuck looking at TVs and our navels and encouraged to believe that’s where we should be. I think we might get more support for automobiles that could take advantage of existing superhighways and drive themselves to whereever we want to go whenever we feel like going. That’d be a big, expensive project too. It would involve the development of and commitment to new technologies as well as huge infrastructure costs but it would have the advantage of appealing to the American power drive. Trains, not so much.
August 14th, 2009 at 6:35 pm
The United States has allocated, in its stimulus package, $2.4 billion over the next 10 years to research and develop the electric engine. That’s just great.
China has a single company, BYD, that has 10,000 engineers, right now, located in one town, working on electric engine development. By the end of 2011, this single company will be producing 500,000 electric automobiles every year.
This recently instituted project (BYD started building cars in 2004) was direct result of Premier Wen Jaiboa insistence that China lead the world in what he believes is the 21st centuries most important technology, the electric engine. BYD was tapped by Jaiboa to kick off China’s attempt at world dominance in what will probably be the world’s most important industry in coming decades, building electric automobiles.
Remember, for every $1.5 billion runway we Free Market Capitalists put down in this country, China builds five brand new airports. For every 100 miles of subway line we build, China will build 10 entire subway systems the size of Boston’s. By the time New York City is able to build something where the Twin Towers were, China will build, NO EXAGGERATION, 40 entire skylines.
Every 5 years China builds more highways than the United States did during our great and distant highway building period of the 1960’s. Centralized planning has allowed China -at a time when they were able to save $2 trillion foreign in currency reserves- to simultaneously undertake the 4 largest building projects in mankind’s history, while, just for the hell of it, as a side project, lay down 10,000 more kilometers of HSR every year than the United States does.
Anyone who does not think centralized planning is the key to victory in this century is out of their fucking minds.
August 14th, 2009 at 6:51 pm
Here the Green party is not very enthusiastic about high speed rail or big new rail stations. They have a point. High speed does not help the environment a lot since train need lots of energy at those very high speeds. High speed rail is also exponential more expensive than just refurbishing exisiting tracks to a point where trains can go arround 200 km/h. The big environmental and car accident reduction winner is a good network of trains where every train is punctual and the next train starts exactly after the other one arrives. More Suiss style, less French. The French tgv system is totally different. The system is just get a tgv full and start him at erratic times depending on demand. Then they go from big town to big town. Overall travel time for people that dont life in the big city center and go all rail is often lower in the connected system. The atempt to mix high speed and a conected aproach in Germany is rather sucky, since it means manny high speed rail trains driving half empty or losing a lot of time at in between stops in meaningless small towns. High speed rail overall does not get many people to abolish a car entirly, a public transport network that focuses more on regular punctual trains every hour does. In Switzerland, people like Matthew have no car. The inner city connected by train lifestyle is so desirable there that the poorer people are more likely to have a car because the denser populated inner city areas are too expensive for them.
August 14th, 2009 at 7:29 pm
We see a lot of technical discussion on this blog and many others- but maybe not enough connect-the-dot.
It’s not a choice between HSR, renewable power generation, and improved grids- it’s all three working together. The HSR provides a market for the power and an infrastructure spine for the power grids. The renewable power sources allow us an option when the jet fuel stops flowing. The distribution grid modeled on rail lines brings the power to the industries and people who locate near the rail lines.
Back when industry wasn’t coddled in a cradle-to-the-grave socialism for the rich, this was pretty clearly understood. The UP not only hauled coal, it built special locomotives for their own use that could burn the slack coal. The streetcar magnate always tried to build an amusement park or cemetery at the end of the line, and tract houses around the stations. Many a town got their first electrical power because one guaranteed customer- the streetcar- made it possible to build the power plant.
Over the past 50 years America has become a very mobile nation, with many people far from their birthplace and maybe looking for a ‘next’ job that’s even further. All of this is going to come to a screeching halt when the oil runs out for flying airplanes.
Maybe you think that won’t happen for another 20 years. That’s still a very short time considering the amount of work to be done.
This is a historical moment- one the Boomers were denied. The leftist Boomers thought the psychological stress of America becoming the worldwide champion of dictatorship would blow up society- but it didn’t happen, because the oil kept flowing. Home loans not only stayed cheap, they got cheaper and by the end of the century lenders would almost pay you to buy a suburban home. Even stagnant wages were enough to keep the resource-hog of the world snorting happily in his muddy home.
But now we’re coming around to the brass ring again, and this time it’s for all the marbles.
August 14th, 2009 at 7:50 pm
Re minderbender at 25: “Industrial policy does not refer to public-sector industry, or even to policies like workers’ comp or pension regulation, though those are policies that hugely affect industry. Industrial policy involves fostering particular industries seen as valuable,”
—————–
You mean like acquiring a monopoly on an enormously powerful new bomb capable of blowing up entire cities — and gaining this prize while in the midst of a Global War/fight to the death? Would that qualify?
Manhattan was not just Los Alamos. It was massive plants –many of them secret — located all over the USA. Dispersed and compartmented because that was how you maintained security. Entire cities like Hanford, Washington closed off to outsiders.
August 14th, 2009 at 7:54 pm
1) Does anyone think the US military operates on the basis of the free market? When We invaded Iraq in 1990, did Schwartzkopf say “Boys, I was thinking about making up a campaign plan but that would be central planning and contrary to the American way. Commies do that. We are free market capitalists, so I want every division, airborne unit, and infantry platoon to compete. You all haul ass to Baghdad and first one who gets there wins a large monetary award.”
August 14th, 2009 at 7:57 pm
HSR would be great. Americans need to travel the U.S. more. That way they can spend money, without having to create or buy more junk. A strong arts and crafts movement could also boost the economy.
August 14th, 2009 at 8:00 pm
Robotics on the street reduce oil consumption by 60% and create a few hundred million jobs. It is an industry that will revitalize global industry and be led by the United States, unless Yglesias and Obama get confused.
August 14th, 2009 at 8:07 pm
@30: No, nuclear weapons would not qualify. Just because something is desirable does not mean that its pursuit constitutes industrial policy. Likewise, merely because a project is large in scale and involves manufacturing does not make it industrial policy.
The logic here seems to be that if you can find something that is definitely industrial, and definitely policy, that you will have identified industrial policy. This reminds me of Freddy and Eliza deciding to study Chinese and history in order to master Chinese history. You can agree with that logic if you like, but “industrial policy” is generally used to mean interventions affecting the location of economic activity, and in particular the establishment of desirable industries domestically.
August 14th, 2009 at 8:20 pm
Re: Add to that the fact there was little competition from foreign manufacturers as their factories were destroyed by the war.
First off this is not true: British, Swedish, Swiss, Canadian and Australian factories were mostly or wholly intact. While Germany, Japan, etc, rebuilt in less than a decade. More signifcantly, foreign factories simply did not provide a lot of competition for the USA, war or no war, since only Canada was close enough where the shipping costs didn’t make foreign goods less competitive than domestic ones, given that labor costs and other production inputs were not too greatly different throughout the industrialized world. Apart from some high end prestige luxury goods (Swiss watches, Rolls Royces, French colognes etc.) there really wasn’t much reason to buy foreign goods.
August 14th, 2009 at 8:50 pm
@ #6;
I vote for railroads AND a space elevator.
August 14th, 2009 at 9:55 pm
We may or may not need an “industrial policy” for other reasons, but to address the slow recovery issue what we actually need is a productive jobs program. Involuntary unemployment levels above the frictional rate are an ongoing waste of a crucial economic resource, and the answer is to get those people jobs doing something productive.
Is something like a massive investment in HSR really a great jobs program? A little bit, but I have my doubts about how many jobs we could squeeze out of HSR in a sufficiently timely fashion. In fact, given the nature of modern economies I have my doubts about any one or two really big ideas having the desired short term impact, and instead I think we need precisely the sort of grabbag of thousands of smaller programs that everyone seems to hate.
That said, we should definitely be investing a lot more in passenger rail over the next couple decades. But that is because we have underinvested in passenger rail over the past few decades, and in that sense this is a solution to a problem that long predates the recession.
August 14th, 2009 at 10:16 pm
Matt,
We’ve been through this all before. You’re not serious about high-speed rail, because if you were, you’d have to crusade against the environmental and legal rights revolutions of the 1960s.
Nowadays, it takes at least 8 years of haggling with regulators and lawyers to get dirt turned for a golf course in California. For example, a nine hole par 3 course just opened on the seacliffs of the point of the Palos Verde peninsula just south of LA on the land where the Marineland theme park was. Marineland closed in 1986. In other words, for 23 years what might be the single best piece of property in Southern California sat unused until it could finally be turned into a resort hotel and small golf course.
An LA to SF high speed rail line through the 50 miles of huge mountains north of LA would require so much environmental and NIMBY haggling that no construction workers would be employed in the next decade or even in the one after that.
August 14th, 2009 at 11:18 pm
Nowadays, it takes at least 8 years of haggling with regulators and lawyers to get dirt turned for a golf course in California.
Now there’s a fucking outrage! Where will all those lawyers play golf in the meantime?
BTW, what with all the fertilizers, pesticides, irrigation, herbicides, invasive exotic species, etc., most golf courses are huge environmental disasters. But hey, you still don’t see many black people on them, so I guess that’s why Sailer’s got his panties all twisted up.
August 15th, 2009 at 12:22 am
@ron – “We need lots of BIG projects that are very labor-intensive.”
The Internet didn’t accelerate growth because it was expensive. It wasn’t labor-intensive either. Nor did it have hyper-motivated grass root NIMBY’s, BANANA’s, , Davis-Bacon cost accelerators, takings initiatives, land-use rules, etc., trying to stop it from happening at all costs. Sumner notes today that Beijing and Shanghai add about 1 subway line per year. Money or none, can you imagine that happening in any American city?
“WWII is a decent example of industrial policy.”
Patriotism trumps greed for awhile, but then. We’ve had so many examples of failed industrial policy, and so few successes, it’s hard to believe anyone would look there.
@Colatina – “The posts today are some of the best I’ve seen in some time on this blog.”
Grading on the curve, are we?
@minderbender – “It’s amazing what WWII did for Americans’ balance sheets.”
I love this blog! Let’s ration everything, limiting sales of every product out there. That’ll do wonders for unemployment.
@Don Williams – “What do you think the Manhattan Program was?
Whatever Manhattan was, it wasn’t industrial policy. Government has a good record at supporting basic research. It’s after that, when the money gets big and politics gets involved, that the problems come.
@mark – “Let’s build a space elevator.”
Tons more fun, but it won’t make us richer or put people back to work…
@Rob – “But NAFTA is part of an industrial policy as are copyright laws as are farm subsidies.”
You’re stretching the term, but do you really want to talk about those two as successes? Yikes.
@daveNYC – “There’s also the danger that whatever the new hotness is would end up generating another bubble.”
There’s also the possibility that bubble-to-bubble is the only path to get growth (here, anyway) that’s close to enough. Hope I’m wrong about that.
@Marshall – “By coordinating means, the government can in effect pay off individuals’ debt by incurring their own, and the goods and services the government bought from individuals by paying off the debt spur growth in a way that individuals acting alone would not be able to attain, i.e. by building railroads.”
But the government’s debt is unsustainable. I.e., we’re now in a “government” bubble, that is no more sustainable than the others.
@NealB – “The idea of being able to jump on a train here in Milwaukee, Wisconsin and take off at 180 MPH on a train to New York or Seattle sounds great.”
Actually, the initial corridors would be upgrading the Boston to DC corridor, creating a San Diego/SF corridor and a triangular Dallas/Houston/San Antonio corridor.
“Voters here have no vision for the grand schemes any more.”
The issue is that we’re spending all our money on health care instead of grand projects. Plus, grand projects got much more expensive, partly because of….health care and partly because of legal/regulatory delays. Time is still money.
@Max424 – “Remember, for every $1.5 billion runway we Free Market Capitalists put down in this country, China builds five brand new airports.”
You think that problem is because of free markets? How about labor, historic preservation, environmental, and other democratic forces that will do everything in their power to prevent another runway from getting built anywhere. Governments own and run US airports, not capitalists. The UK was smart enough to privatize its airports. Us, not so much. See urgs, above.
@Mattyoung – “Robotics on the street reduce oil consumption by 60% and create a few hundred million jobs.”
Love ya, Matt, but robotics will destroy far more jobs than it creates, unless we figure out how to increase our skill levels. We have way too many people who are only capable of the kind of job that robots are about to take over.
@DTM – “what we actually need is a productive jobs program.”
When did that solve anything? It’s probably better than straight welfare, but we only succeed when we employ people doing work that provides goods and services that people want to pay enough for. Planting trees isn’t going to work this time around.
@DMonteith – “BTW, what with all the fertilizers, pesticides, irrigation, herbicides, invasive exotic species, etc., most golf courses are huge environmental disasters.”
Every change has some downside, and in the US, most changes have someone like this ready to go to the (legal and regulatory) mat to stop them. You’ll never see us adding subway lines at the 1/year rate…
August 15th, 2009 at 12:47 am
[W]e only succeed when we employ people doing work that provides goods and services that people want to pay enough for.
Actually, projects with net positive externalities can be economically beneficial whether or not the direct recipients themselves “pay enough” (assuming by that you mean pay enough to cover the projects’ costs). In fact, in certain cases– when the net positive externalities are high enough and transaction costs are nonnegligible–it can make economic sense just to give away goods and services for free.
Again, ultimately the question is whether or not the employed person’s labor would be productive. If that condition is met, it will likely benefit society to have that person employed rather than not, and that is true whether or not some third party is actually paying for the product of the person’s labor.
August 15th, 2009 at 5:04 am
@40 Larry: “Governments own and run US airports, not capitalists.”
Yes they do. Local and state governments. And it usually takes, on average, 18 years and more than $1 billion for private contractors to build a single modern runway at major US airport. Yes, red tape plays a part, but one of the things we do best as a Nation plays a bigger part -the old taxpayer milk and bilk.
And you know what, Larry, for your information, I don’t really give a rat’s ass about building runways. It’s not the point, anyway. I would love to replace at least half of all commercial flights in this country, and need for so many airports, with HSR. The reasons are many, but the most importantly consideration; the days of aviation as a viable Capitalist enterprise are just about over. One sustained oil shock and commercial aviation is kaput. Right now the margins are so slim for commercial air carriers -due mainly to fuel consumption costs- that they have taken to eliminating magazines from flights to lesson weight. That’s right. Magazines! That is Desperation with a capital D in the Capitalist world, my Free Market friends inform me.
And if commercial airlines go under, and they are odds on favorites to do so, and relatively soon, what do we do? We’re not Spain. We have no fallback position. Government bailout? Government takeover? Republicans would fight both -tooth and nail. Theoretical Capitalism’s lackeys, Republican Senators, would wax poetic about the magic of the markets and the Creative Destruction Principle of Capitalism and how we have to accept -as a Nation of flag waving Americans- not being able to fly anymore because that’s the way chips fell. The Free Market must be allowed to prevail. The weak are to be destroyed and (hush, hush) if the Nation-State follows, so be it.
My point about China is simple -in the exponentially hyper-paced modern world, Central Planning is a requisite for survival. If you believe the Nation-State is not an anachronism, and wish to live in one, you better hope your Nation-State has a plan.
China has a plan. China is currently making tangible advances so enormous and on so many fronts they dwarf even the wildest imaginings of American progressives. Yes, China has an evil government -the Communist Party does not provide government health care for its citizens nor do they adequately protect the Rights of Workers. Sound familiar? But the Chinese have put themselves in position where they are not only the world’s most dominant power but they are planning to maintain their leadership status by preparing their nation, now, for the inevitable pitfalls and disasters that lie ahead -like possible massive oil shocks or Climate Change induced catastrophes. They have done this by putting trillions in the bank and by building out various infrastructures that will allow them to survive a future without oil, or water from the Himalayas, or unbalanced trade with America.
Can anyone envision the United States starting to contemplate designing even the early planning stages of a national project that would eventually lead to the US creating a similar National State Preparedness that we ALREADY SEE IN CHINA NOW -before the 21st century runs out?
That is a rhetorical, by the way. The non-answer is no.
August 15th, 2009 at 6:22 am
Krugman’s LSE Robbins lectures are completely fascinating. I was listening to them today – for the 2nd time – while working outside. All three of them are well worth your time.
The Return of Depression Economics Part 1: The sum of all fears
The Return of Depression Economics Part 2: The eschatology of lost decades
The Return of Depression Economics Part 3: The night they reread Minsky
August 15th, 2009 at 7:37 am
Re: The Internet didn’t accelerate growth because it was expensive. It wasn’t labor-intensive either.
Huh? The Internet revolution of the 90s most definitely did accelerate growth, and it was extremely labor-intensive. Remember the tech boom of the late 90s? Some of that was due to the hype and hysteria of the Y2K bug, but a lot of it was due to the fact that every business, charity, school, church, government entity, and individual wanted to get online– requiring not just an Internet connection, but massive upgrades to existing software and hardware. The problem was that this was a one-time retooling; labor demand did not continue at those levels indefinitely. But that will true of just about anything like that. Once the upgrade is finished the number of people needed to maintain it will be smaller.
Re: And if commercial airlines go under
Which commercial airlines? Not all of them: there’s too much demand for that (been to an airport at peak time lately?) If one airline went under, a possibility I admit, the others will pick up its business.
Re: But the Chinese have put themselves in position where they are not only the world’s most dominant power
In what alternate universe? China is still a second-rank power and the US remains on top of the heap (largest economy, largest military etc.) Even in its own neighborhood China is not unchallenged: Japan and increasingly India are there. Morover the Chinese have some vexsome probelms to deal with: most of their population is still stuck in Third World misery; their demographics are awful; and their government structure is severely schlerotic.
August 15th, 2009 at 10:57 am
Re: But the Chinese have put themselves in position where they are not only the world’s most dominant power
In what alternate universe? China is still a second-rank power and the US remains on top of the heap (largest economy, largest military etc.) Even in its own neighborhood China is not unchallenged: Japan and increasingly India are there. Morover the Chinese have some vexsome probelms to deal with: most of their population is still stuck in Third World misery; their demographics are awful; and their government structure is severely schlerotic.
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Excellent points. Too few seem aware of China’s demographic crisis
http://www.npr.org/templates/story/story.php?storyId=89572563
Just as hardly anyone talks about Russia’s demographic collapse (average lifespan falling, population shrinking) when talking about Putin’s aggressive posturing.
We still have Cold War stereotypes of these countries’ strengths in our heads, when in reality both are capering on the edge of a cliff
August 15th, 2009 at 11:07 am
Rob Says:
August 14th, 2009 at 4:56 pm
Sorry Matt all countries have an industrial policy. But in the US thats treated as a dirty word ans so we don’t discuss it. But NAFTA is part of an industrial policy as are copyright laws as are farm subsidies. The US just refuses to acknowledge what its doing.
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It just depends on how you define *industrial policy*. You are right that we are quite comfortable with government funded R&D, transfer of technologies developed for defense to commercial use (jet engines, computers) and etc. What we aren’t comfortable with is the government taking a very active and blatant role in picking individual companies as winners and losers and taking ownership positions in them. That opens the door to even more corruption than we have now
August 15th, 2009 at 12:15 pm
It’s interesting to see the thread discussing whether we have or should have an industrial policy.
Since the beginning of the year, the oil industry has spent $82 million lobbying Washington DC. Call half of that the sheerest waste and you still have a huge effort being made by Big Oil to buy industrial policy. And there’s no reason to think it’s not working. Just compare the proposed budget for roads this year with the proposed budget for electric trains.
In the mid-30s Dupont projected that their biggest market for the next 50 years would be chlorine- and then they made it happen. Hemp was outlawed, and we ended up with dead-tree paper.
What Americans imagine as a ‘free market’ only exists for marijuana and organic foods. Everything else is mandated by the government and supplied by cartels. The only thing lacking in our industrial policy is some way for the public to understand or influence it.
August 15th, 2009 at 12:51 pm
The basic relationship between fuel prices and commercial aviation service is just that at higher structural fuel prices, fewer routes (usually shorter routes with lower numbers of passengers) are economically viable. In fact, back in the pre-deregulation days, we were already de facto requiring airlines to subsidize a lot of uneconomic routes. After deregulation, a lot of these routes were eliminated (leading to entire airports being eliminated as well), but we also propped up some routes with the Essential Air Service, which adds government subsidies to ticket fares, sometimes at a very high ratio, in order to make some routes economic.
So if fuel prices continue to increase structurally in real terms, either commercial airlines will keep cutting more and more routes and intercity transportation options will get worse in many areas, or we will have to greatly increase our subsidies for uneconomic airline routes, or we will have to provide alternatives to air service for these areas. But in any event, it is unlikely commercial air service will entirely disappear, at least in the conceivable future, because there aren’t viable substitutes for certain routes even at very high fuel prices (mainly sufficiently long or overwater routes).
August 15th, 2009 at 1:17 pm
Does anyone think the US military operates on the basis of the free market?
“War is a government program.” — Sheldon Richman
August 15th, 2009 at 6:16 pm
@DTM – “Actually, projects with net positive externalities can be economically beneficial”
Yes, to address market failures. My point is that we don’t have enduring needs that offer anything like the required scale and that we can sustainably pay for.
@Max424 – “And it usually takes, on average, 18 years and more than $1 billion for private contractors to build a single modern runway at major US airport…. I would love to replace at least half of all commercial flights in this country, and need for so many airports, with HSR.”
Isn’t that because the projects are grossly overregulated, e.g., by Davis-Bacon? The construction isn’t what takes so long. It’s all the overhead. China uses private contractors for its lightspeed subway construction projects!
“Right now the margins are so slim for commercial air carriers -due mainly to fuel consumption costs”
Sorry, margins are so small because we have overcapacity and slumping demand. Airlines hedge their fuel costs. We could help on the demand side, and reduce the carbon footprint of average flights by upgrading the airports and the ATCS so that flights take shorter routes and spend less time waiting for takeoff and landing slots.
“And if commercial airlines go under, and they are odds on favorites to do so, and relatively soon, what do we do?”
They’ve gone bankrupt repeatedly. They’ll go bankrupt again, and their creditors will take them over. Around and around we go.
“in the exponentially hyper-paced modern world, Central Planning is a requisite for survival”
Central planning, including in China, was dumped precisely because bureaucrats couldn’t and wouldn’t keep up with that hyper-pace. China’s investment planning is highly decentralized and varies dramatically between, say, the coast and the interior provinces. Their monetary policy is about as centralized as ours, but there is now a huge struggle between the center and the periphery over things like corruption and the environment.
@JonF – “The Internet revolution of the 90s most definitely did accelerate growth, and it was extremely labor-intensive.”
Of course the Internet accelerated growth. However, the revenues per employee of Internet companies were among the highest ever seen, i.e., not labor-intensive.
August 15th, 2009 at 6:44 pm
Does anyone think the US military operates on the basis of the free market? When We invaded Iraq in 1990, did Schwartzkopf say “Boys, I was thinking about making up a campaign plan but that would be central planning and contrary to the American way. Commies do that. We are free market capitalists, so I want every division, airborne unit, and infantry platoon to compete. You all haul ass to Baghdad and first one who gets there wins a large monetary award.”
I wonder, if we had just offered 10 billion for Saddam’s head, would the outcome be any different? Save 990 billion obviously. Get general chaos for a while after Saddam dies, then organic stability growing out of individual city-states. Essentially the same result for the people of Iraq.
August 15th, 2009 at 6:46 pm
It’s interesting that MattY uses major tennents of the ABCT when he can bastardize it to justify more government control.
August 15th, 2009 at 9:01 pm
Yes, to address market failures. My point is that we don’t have enduring needs that offer anything like the required scale and that we can sustainably pay for.
“Market failures” can be a misleading term: I prefer to talk in terms of externalities and transaction costs when explaining why some things should be subsidized or even given away. In any event, we don’t necessarily need to be addressing “enduring” needs that we can “sustainably” pay for, provided the unemployment in question is cyclical and not structural. Again, to that extent we’re just looking to prevent some waste of an economic resource.
August 16th, 2009 at 11:12 am
@dtm – The mancession appears to have a big slice of structural in it. We just don’t need that many financiers, construction workers and mortgage brokers. It’s actually worse. The private sector has had real trouble creating net jobs since the tech bubble popped. US skill levels have been flat for way too long, while workers in the rest of the world have been getting competitive in domain after domain. Add that to the rise of the robots, and there’s a long-term problem.
August 16th, 2009 at 5:03 pm
Re: Of course the Internet accelerated growth. However, the revenues per employee of Internet companies were among the highest ever seen, i.e., not labor-intensive.
Please define labor-intensive. I was in IT in the late 90s and the demand for IT workers was like nothing I’ve ever seen. If that wasn’t labor-intensive (albeit for a few years) then I don’t think anything qualifies as labor intensive.
Re: Add that to the rise of the robots, and there’s a long-term problem.
True, but realize as well the US is not alone in this. automation replacing human labor is an issue just about everywhere. Even China has been losing jobs to automation.
August 19th, 2009 at 2:06 am
Labor intensive means a large amount of labor per amount of output. Capital intensive means amount of capital…You can’t be both and have a profitable business. That’s why I cited the large amount of revenue per employee.