Tag Archives: public goods

The Return of Depression Economics

Paul Krugman argues that the idling of productive capacity in the world economy makes investment in public goods more likely to pay off now than at other times. While in good economic times credit is rapidly transferred to speculative growth opportunities, in bad economic times credit contracts, and much more production can be achieved with the same amount of wealth. Krugman calls this ‘Depression Economics,’ because it is true in bad economic times only.

Economist’s View: Krugman: What to Do
What to Do, by Paul Krugman, NY Review of Books: What the world needs right now is a rescue operation. The global credit system is in a state of paralysis, and a global slump is building momentum as I write this. Reform of the weaknesses that made this crisis possible is essential, but it can wait a little while. First, we need to deal with the clear and present danger. To do this, policymakers around the world need to do two things: get credit flowing again and prop up spending.

I believe not only that we’re living in a new era of depression economics, but also that John Maynard Keynes—the economist who made sense of the Great Depression—is now more relevant than ever. Keynes concluded his masterwork, The General Theory of Employment, Interest and Money, with a famous disquisition on the importance of economic ideas: “Soon or late, it is ideas, not vested interests, which are dangerous for good or evil.”

We can argue about whether that’s always true, but in times like these, it definitely is. The quintessential economic sentence is supposed to be “There is no free lunch”; it says that there are limited resources, that to have more of one thing you must accept less of another, that there is no gain without pain. Depression economics, however, is the study of situations where there is a free lunch, if we can only figure out how to get our hands on it, because there are unemployed resources that could be put to work. The true scarcity in Keynes’s world—and ours—was therefore not of resources, or even of virtue, but of understanding.

However, the market, not the government, picks winners through the savage mechanism of creative destruction. The government is not able to perform this role effectively.

Simply spending money on neat toys like new schools or bridges to nowhere is not the answer, because such project generate nothing and leave us with costs we will have to pay once the economy comes back.

Rather, we should focus on infrastructure spending that changes the system in ways favorable to us. The most obvious bad aspect of the system is that economic growth leads to greater consumption of oil and natural gas, which enrich bad states like Venezuela and Russia. Spending projects should focus on breaking this link, so that we can become wealth without them becoming powerful.

Projects like Solar Los Angeles, Windy Maine, and a million electric cars are part of the solution.

Heck, even the CEO of Poet Ethanol will be addressing a forum together with Tom Daschle and Jim Woolsey. The time to weaken the chains that bind us to Gap states like Russia and Venezuela is now.

Japan helps reduce the cost of Information Connectivity

Props to Japan for being the first country in asia to adopt the OpenDocumentFormat. Part of globalization is work on building global public goods, that everyone can benefit from. The OpenDocument format is an example of such a good, because more people will be able to access government information and services without paying rents to Microsoft.

Good show!

Christian Love, Public Goods, and Open Source

“Public goods” is the economics idea of something that benefits everyone and can’t be denied to anyone. The schoolbook example of a public good is a lighthouse, by some scary rocks in the sea. When the lighthouse is working, every captain, and not just those who helped pay for the lighthouse, enjoy the benefits of seeing in the nights. All boats become safe, and not only those ships whose owners have paid.

Another example of a public good is national defense. Everyone, common citizens, soldiers, and criminals, enjoy the military’s protection from foreign armies. Sure, the government can come after you in other ways if you don’t pay your taxes, but there is no way for the government to allow the barbarian horde to enter your home without allowing it to enter our national borders, as well.

Interesting, the Bible describes hatred as destroying public goods. In Malachi when God famously loves Jacob but hates Esau, hatred is operationalized by destroying things that all of Esau’s people would have enjoyed…

And I hated Esau, and laid his mountains and his heritage waste for the dragons of the wilderness.

Whereas Edom saith, “We are impoverished, but we will return and build the desolate places”; thus saith the LORD of hosts, “They shall build, but I will throw down; and they shall call them, The border of wickedness, and, The people against whom the LORD hath indignation for ever. “

Pretty heavy stuff.

Esau’s people lose the public good of collective security — they experience hate.

And so you don’t think this is just part of the Old Testament forgotten by the kinder, gentler Christians, Paul repeats the story in his Letter to the Romans. Yes, the same Paul who emphasized Love as the core of Christianity.

God’s providing us with a clue on the meaning of love and hate. Hatred means, among ohter things, destroying public goods. Love means, in part, building public goods. A loving, Christian government would thus build infrastructure, such as lighthouses. A loving, Christian government would thus bring security to the people with an army. But both lighthouses and armies fall short of a true love, because both involve taking things away from others in order to provide it to the public. Thus, true love by the community would involve generating public goods without the use of taxes — without police powers. “Forced love” is called rape.

A more loving public good are the open-source word processes and document formats. These are free, universally available, tools that allow professional word processing, spreadsheet calculation, and presentations. They have no marginal cost and no fixed cost. They are available to all people in all places, weather students or lawyers, Rwandans or Americans. OpenDocument is a public good. OpenSource OpenDocument is a public good. Encouragint the widespread adoption of the open source OpenDocument technology is as simple as using OpenDocument-compatible tools, such as free-as-in-speech OpenOffice and free-for-use Google Docs & Spreadsheets. Quiet evangelism, such as making your originals in ODT and sending those alongside Microsoft Word DOC files, helps.

But the government can help the people — all people — too. Recently, California became the fourth state to consider requiring that “all documents, including, but not limited to, text, spreadsheets, and presentations, produced by any state agency shall be created, exchanged, and preserved in an open extensible markup language-based, XML-based file format.” For little or no extra cost, California may liberate millions of Californians from the rentiers (ron-tyays) at Microsoft. Even better, the spread of this technology in California would have viral effects, ultimately making everyone’s information easier to make, easier to store, and easier to read.