I read http://mises.org/daily/3058 and understood as much as I could of http://blog.mises.org/6734/government-produces-nothing-ever/. Here is my problem: they say people would have had the money otherwise to spend on what they really wanted, the same amount of money. But who says that would have employed the people the government works project did? The people may spend $1billion dollars on demands in the economy, opposed to the government using it on a road where there was no real demand, but who says that $1 billion spent in the private economy would have employed the people the government did on the road project. Hopefully you understand my confusion and can clear it up... I think it may have something to do with the fact that wealth from the private sector's billion is a better measurement than employment under the government's billion on roads.
Also, is this a sort of broken window fallacy thing, where we miss what the money could have been spent on otherwise?
It is indeed yet another version of the broken window fallacy.
You are right, they quite likely would not be the same jobs and the same people as the govt hired. What of it? For every govt job, one job is taken away.
For every govt road worker building a road nobody wanted, there is one less tailor making clothes that people do want.
"Most people are in arrested development and cannot use logic". Jacob
Chapter 4 in Economics In One Lesson, "Public Works Means Taxes", covers your question exactly:
http://fee.org/library/books/economics-in-one-lesson/
Stossel's got ya covered...
But to get to the specifics of your question...you asked "who says that $1 billion spent in the private economy would have employed the people the government did on the road project".
The answer is, "no one." No one is claiming that the exact same people who were employed to build a road would be employed in a hotel that has more guests because people have more money to spend on vacations. That's not the point. The point is it is a question of what people value. Your problem is you want to know "What about the guy who lays asphalt? What if he's not cut out to hold a job in the sectors that grow?" And the answer is, if he can't find a job laying asphalt, he needs to learn a new skill.
There used to be guys who made horse buggy whips too. But when everyone started driving cars, no one bought buggy whips. "What about the guy who makes buggy whips? What about his job?" Well he had to find a new job. Would you prefer the government took your money from you by force and just gave it to him anyway? Would you prefer everyone said "the American buggy whip industry is not doing so well, they need a bailout"?
Companies fail because they are wasting resources. That's it. They are combining capital in ways that actually destroy value. Usually it's because they can't find enough people who want their product at the price they are selling. So why should the government reach into your pocket and hand over money to someone who you weren't willing to give it to in the first place? And for what? To save some people's jobs?
Imagine how much wealthier we would all be if the government weren't there to take your money and keep giving it to buggy whip makers and instead the buggy whip makers got new jobs making shit you actually wanted...and were willing to voluntarily pay for.
My random thoughts on this subject:
You're correct in saying that money spent by government has to be taken out of the private sector first. And you're also correct in saying that we cannot determine how many jobs would be created by government vs. the private sector. The focus shouldn't be on jobs. Given a free market for labor, the jobs "problem" would be taken care of.
Given an Austrian-style bust, real wages would adjust to the new market conditions until the demand for labor would equal the supply (in other words, until there was no involuntary unemployment). Having some kind of government "jobs program" would only slow this process of reallocating one input (labor) in order to meet the demands of consumers.
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Let's even entertain the idea that more jobs would be produced by government action, well the government action is not as productive, and therefore it decreases the overall wealth of society as productive industries are now less productive and less productive industries are now taking in more of societies' wealth, now taking in scarce resources on unproductive projects, wasting money.
So fine, you have created more jobs, but directly at the expense of the standards of living of everyone who is, and would otherwise be employed in the economy. Why not encourage full employment right now by paying people thousands of dollars for digging holes? That would create jobs, but they would be unproductive and they would send production to unvalued areas of production.
Government Works create jobs like the Census creates jobs.
I am against government and government spending and identify with the Austrian school of thought. I am just trying to figure out why, considering all possibilities, I am, if that makes sense. So just throwing it out there, not saying i think this, but: Digging holes is something no one demands. There is no demand for a dug hole. However, there is a demand for roads. And as long as the government holds a monopoly on public roads, through force I know, but they hold a monopoly on it, so no company can go do it. Then say the a road gets shitty over time or there actually is a market demand for a new road somewhere, and the government is the only one who can meet that demand under their monopoly. They could then label it as "creating jobs" but they might actually be doing something that has a demand, unlike just digging holes. I know that ALL spending would be based off real demand if the government was out of the picture, but as long as we have a government taking our money, can we really be against ALL government spending? We can be against the government being a part of it, the fundamental essence of government and taxation, but what they are doing with the money once the steal it can be beneficial based on demand, and I think that is something people seem to miss. Lots of libertarians seem to think all government spending is useless like digging holes, even though sometimes there is a demand. The government shouldn't be the one meeting that demand, I understand,but not all governemnt spending is the same as "digging holes". Just a thought.
Road builders and government monopoly on roads are inseperable, you can't remove the road workers and leave the monopoly and you can't remove the monopoly and keep the workers. The ideal solution is to remove the monopoly and the road workers by allowing unregulated private roads.
C Le Master:However, there is a demand for roads. And as long as the government holds a monopoly on public roads, through force I know, but they hold a monopoly on it, so no company can go do it. Then say the a road gets shitty over time or there actually is a market demand for a new road somewhere, and the government is the only one who can meet that demand under their monopoly.
I would recommend rereading Economics In One Lesson to help smooth out your thought process:
Since the government has a monopoly on roads, there is no profit and loss test. Sure they might make correct guesses some of the time, but now to what extent (do I build a second road there, a fourth, do I expand existing roads to the area)? The only way to know is to privatize the roads, and allow the profit and loss signals to work.
Micah71381:The ideal solution is to remove the monopoly and the road workers by allowing unregulated private roads.
I would just use the words privately regulated, not "unregulated" (even though I know that is what you meant).
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