“You lost me on the Tennessee Valley Authority,” I said. Why does the size matter in this case?”
“Simple. Sheer size makes the danger of optical illusion greater. There’s a huge dam, a stupendous arc of steel and concrete. Economists and politicians called it ‘greater than anything that private capital could have built.’ It’s a heaven of socialists. They use it as a symbol of the ‘miracles’ of public construction, ownership and operation. There are huge generators, power houses, a whole region lifted to a higher economic level with factories and industries that could not otherwise have existed.”
I grabbed the opportunity of the instant and jumped in with, “Well. So, you admit it. It did a lot to improve the economic situation there. How can you possibly argue against that?”
“Draco, the problem is that it’s all presented as a net economic gain. They don’t consider the offsets. Again, I’m not going to go into the merits of either the TVA or public projects like it. But this time we need a special effort of the imagination to look at the debit side of the ledger.”
“I’ll bite;” I said, “why is it so particularly hard to do in this situation?”
“When taxes were taken from people and corporations from all over the country, but were spent in only one section of the country, why should it come as a surprise when the section that got the money became comparatively richer. The fact is, the other sections of the country, the sections that lost the money, became comparatively poorer. Think about it. The project that was so big that ‘private capital could not have built it,’ actually was built with private capital, the capital that was expropriated from the private sector.”
A light suddenly went on in my head. “It’s almost as if we are talking about ‘opportunity cost;’ an added cost of doing business. It’s the difference between the actual values resulting from the use of capital, say for Project A; compared to the use of the same capital for Project B. The fact is that this is an every day situation for businessmen. They are always deciding between putting capital into use for production or putting it into use as an investment with equal risk but greater return. It’s the most basic, most far-reaching kind of decision a businessman can make. What's more, all decisions of this kind are based on intangible factors, things that can’t actually be seen. Making these kinds of decisions requires a lot of imagination. But, businessmen do it. Now, I’m wondering how they can do this kind of thinking when it involves private money but can’t do it for public money. Neighbor, this is very hard thinking,. I don’t know how ordinary people are going to get the picture. As you said, it takes a special skill. And practice.”
“Well,” said my neighbor, “the TVA may be one of the most visible, but it isn’t the only example. There are hundreds of boondoggling projects that were dreamed up with the main object to ‘create jobs’ and ‘to put people to work.’ The crux of the problem is that the usefulness of the project itself was a subordinate consideration.”
“Hundreds!” I exclaimed, “it’s probably thousands, maybe hundreds of thousands of ‘make work’ projects. Wow! What a fertile breeding ground for political corruption and waste. You know, neighbor, it just boggles the mind, doesn’t it?”
“Simple. Sheer size makes the danger of optical illusion greater. There’s a huge dam, a stupendous arc of steel and concrete. Economists and politicians called it ‘greater than anything that private capital could have built.’ It’s a heaven of socialists. They use it as a symbol of the ‘miracles’ of public construction, ownership and operation. There are huge generators, power houses, a whole region lifted to a higher economic level with factories and industries that could not otherwise have existed.”
I grabbed the opportunity of the instant and jumped in with, “Well. So, you admit it. It did a lot to improve the economic situation there. How can you possibly argue against that?”
“Draco, the problem is that it’s all presented as a net economic gain. They don’t consider the offsets. Again, I’m not going to go into the merits of either the TVA or public projects like it. But this time we need a special effort of the imagination to look at the debit side of the ledger.”
“I’ll bite;” I said, “why is it so particularly hard to do in this situation?”
“When taxes were taken from people and corporations from all over the country, but were spent in only one section of the country, why should it come as a surprise when the section that got the money became comparatively richer. The fact is, the other sections of the country, the sections that lost the money, became comparatively poorer. Think about it. The project that was so big that ‘private capital could not have built it,’ actually was built with private capital, the capital that was expropriated from the private sector.”
A light suddenly went on in my head. “It’s almost as if we are talking about ‘opportunity cost;’ an added cost of doing business. It’s the difference between the actual values resulting from the use of capital, say for Project A; compared to the use of the same capital for Project B. The fact is that this is an every day situation for businessmen. They are always deciding between putting capital into use for production or putting it into use as an investment with equal risk but greater return. It’s the most basic, most far-reaching kind of decision a businessman can make. What's more, all decisions of this kind are based on intangible factors, things that can’t actually be seen. Making these kinds of decisions requires a lot of imagination. But, businessmen do it. Now, I’m wondering how they can do this kind of thinking when it involves private money but can’t do it for public money. Neighbor, this is very hard thinking,. I don’t know how ordinary people are going to get the picture. As you said, it takes a special skill. And practice.”
“Well,” said my neighbor, “the TVA may be one of the most visible, but it isn’t the only example. There are hundreds of boondoggling projects that were dreamed up with the main object to ‘create jobs’ and ‘to put people to work.’ The crux of the problem is that the usefulness of the project itself was a subordinate consideration.”
“Hundreds!” I exclaimed, “it’s probably thousands, maybe hundreds of thousands of ‘make work’ projects. Wow! What a fertile breeding ground for political corruption and waste. You know, neighbor, it just boggles the mind, doesn’t it?”
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