"Other people, spending other people's money, on other people." - Fourth category of spending, Milton Friedman
Here is a thought experiment: If emergent/spontaneous order created a demand for a performing arts center then a private sector supply would appear.
If the demand by the few, by the politico and their ilk, created a demand for a performing arts center then a taxpayer funded supply would appear.
If a private supply appeared all the financing/funding, construction, risk/uncertainty and on going expense is borne by the private sector.
If a public supply appeared all the financing/funding, construction, risk/uncertainty and on going expense is borne, not by the public sector, rather it is borne by current and future taxpayers.
Private enterprise is financed privately. Public enterprise is funded by tax.
If a private supply fails, then the price of failure falls on the owners, managers, employees and suppliers of the private enterprise.
If a public supply fails, the few, the politico, pays no direct price for failure other than non-reelection while the price of failure falls directly on current and future taxpayers.
When a notional proposition is put forward by the few, for the benefit of the few, political economy identifies the phenomena as a “scheme”. Stated alternatively, rather than being the product of the many through spontaneous/emergent order, it is an artificial product of the few. It is also known within political economy as “unicorn governance”. How so? The scheme’s basic formula is: A + B x (a magical moment occurs) = result X.
The inefficiency of political control of an economy has been demonstrated more often, in more places, and under more varied conditions, than almost anything outside the realm of pure science. - page 166, Thomas Sowell’s 1999 book, The Quest for Cosmic Justice
Voting is a highly irrational exercise when a large numbers of votes are cast. Really? Yes, spending enormous amounts of time, the price/cost thereof, to become familiar with issues, is greater than the value of one vote as the chances of one single vote affecting the outcome of an election, where a large number of votes are cast, is tiny. Politicos are always harping that one needs to vote. However, a very good question is: Why do so many people vote in the first pace given its irrationality. (1) (2) (3)
But many people feel a responsibility to vote. If you feel that responsibility, and considering local politicos and their associated ilk and the spending habits thereof, complete with the assertion that such spending creates prosperity, one might consider the following when casting a vote:
“Government spending cannot create additional jobs. If the government provides funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If government spending is financed by borrowing from the commercial banks, it means credit expansion and inflation. If in the course of such inflation the rise in commodity prices exceeds the rise in nominal wage rates, unemployment will drop. But what makes unemployment shrink is precisely the fact that real wage rates are falling”. - Ludwig von Mises, Socialism, An Economic and Sociological Analysis, 1951, page 530.
Or stated alternatively:
“The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves". - The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11.
However, politicos rely on Keynesian analysis, as Keynesianism gives them the right or duty to intervene and spend. How so? Try this:
“Keynes was exceedingly effective in persuading a broad group—economists, policymakers, government officials, and interested citizens—of the two concepts implicit in his letter to Hayek: first, the public interest concept of government; second, the benevolent dictatorship concept that all will be well if only good men are in power. Clearly, Keynes’s agreement with “virtually the whole” of the Road to Serfdom did not extend to the chapter titled “Why the Worst Get on Top.”
Keynes believed that economists (and others) could best contribute to the improvement of society by investigating how to manipulate the levers actually or potentially under control of the political authorities so as to achieve desirable ends, and then persuading benevolent civil servants and elected officials to follow their advice. The role of voters is to elect persons with the right moral values to office and then let them run the country.” - Milton Friedman, Richmond Federal Reserve Economic Quarterly, volume 83/2 Spring 1997.
http://www.richmondfed.org/publications/research/economic_quarterly/1997/spring/pdf/friedman.pdf
So are “we all Keynesians now”? That is an oft cited quotation, from a source one would not expect, one Milton Friedman. Problem is, it is merely an excerpt from the entire statement. Here is the entire statement:
“In one sense, we are all Keynesians now; in another, no one is a Keynesian any longer. We all use the Keynesian language and apparatus; none of us any longer accepts the initial Keynesian conclusions.” - Milton Friedman, “Why Economists Disagree,” Dollars and Deficits (New York: Prentice-Hall, 1968), p. 15.
What about those Keynesian conclusions?
“For policy, the central fact is that Keynesian policy recommendations have no sounder basis, in a scientific sense, than recommendations of non-Keynesian economists or, for that matter, non economists.” After Keynesian Macroeconomics (aka After the Phillips Curve), Robert E. Lucas and Thomas J. Sargent, 1978, page 57
http://www.bos.frb.org/economic/conf/conf19/conf19d.pdf
We end this exercise with lots of lever pulling by local politicos spending tons of taxpayer money year after year yet total employment in Guilford County has been flat or declining since its peak in the year 2000. Go figure. (4)
Beware of the non-statistic statistic by the moniker “jobs saved or created”. It is a known-known that government can’t create jobs. What about “saved jobs”. What in the devil does “saved jobs” mean? Saved jobs is a rather recent politico creation that in somehow and in some way bailing out or subsidizing particular industry (aka corporate welfare) with taxpayer dollars is some sort of net positive. Oh please spare us.
So if you feel that responsibility to vote, and considering local politicos and associated ilk, the spending habits thereof, with the assertion that such spending creates prosperity, maybe one doesn’t pull that lever next to that politico’s name so as not to empower particular politicos with the ability to “manipulate the levers actually or potentially under control of the political authorities”.
Notes:
(1) Congressional Incentives and Government Failure, Chris Edwards, CATO Institute, September, 2015.
(2) The Myth of the Rational Voter: Why Democracies Choose Bad Policies, Bryan Caplan, 2007.
(3) Government Failure: A Primer in Public Choice, Tullock, Seldon and Brady, 2002.
(4) The Nussbaum Center for Entrepreneurship, Job Growth. Comparison of Guilford, Mecklenburg and Wake counties,
‘Economic “planning” is one of many politically misleading expressions. Every economic activity under every conceivable form of society has been planned. What differs are the decision making units that do the planning - which range from children saving their allowances to buy toys to multinational corporations exploring for oil to the central planning commission of a communist state. What is politically defined as economic “planning” is the forcible superseding of other people’s plans by government officials.‘(1)
It is a known-known in political economy that politicos want the focus on their intentions not their results. Results are politically inconvenient. Intentions are politically paramount.
If one ponders and reflects for a moment about the inconvenient results of economic “planning“ regarding Greensboro, NC, results of over thirty years of economic “planning” regarding a parade of politicos of basically the same ilk, the aggregate intensions thereof, the result is a +21% poverty rate and one of the highest tax rates in the state. Sweet!
One might further consider that the inconvenient result might be an indicator that the aggregate intensions are a monumental flop.
How in the world can one manage to achieve, simultaneously, the results of mass poverty and max tax? One would have to really work at achieving such a result. One would have to deploy the world's worst policy, on a consistent and constant basis to achieve mass poverty and max tax [see Detroit, Michigan].
Moreover, the powers that be, the non-resultant, keep deploying the same policy over and over. Better yet, they gleefully introduce more of the same e.g. music hall, mega site. Gleefully introduce more of the same as if their past track record is something to crow about.
One would be hard pressed to assign a moniker to a public policy process that results in the poor becoming poorer and the taxed become more taxed. However there are terms that describe the result: cacotopia aka dystopia.
On the thirty year road to cacotopia, one would be remise to only identifying the losers i.e. the poor becoming poorer and the taxed becoming more taxed. Winners surely occurred and are occurring. One can’t spend a gazillion dollars of taxpayer money over thirty years and find the only result being the poor becoming poorer and the taxed becoming more taxed. The taxpayer money went somewhere and that somewhere is the realm of winners. In other words, the plans of the few supersede the plans of the many with the result being a particular and select few winners and many losers. Very nice indeed.
The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves". (2)
Notes:
(1) Thomas Sowell, Knowledge and Decisions, 1996 edition, pgs. 213 and 214.
(2) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11.
“So it’s no surprise that governments with vast powers routinely behave stupidly: they are attempting to do the impossible while being overseen by the ill-informed.” - Don Boudreaux
-Cronyland-
Apparently Greensboro, NC does not rank highly as a place individuals or individual firms would desire as a relocation destination. Could it be that Greensboro is viewed as an economy that is not chronically and indigenously innovative? With an economy lacking in chronic and indigenous innovation the economy at large will lack dynamism and hence lack in jobs in which people feel vital. Would one want to relocate to such a non-innovative and non-vital environment? (1)
If an economy is not innovative and hence not a dynamic economy in which people feel vital, then what sort of economy is one viewing? Likely one is viewing an economy of the few and not an economy of the many. An economy based on the plans of the few and not the plans of the many. A politically directed economy where what little growth that does occur flows to the few and not the many. One might say an economy with a focus on the few at the expense of the many. (2)
An economy that is chronically and indigenously innovative that produces vitality, such economies are in the main, products of spontaneous/emergent order or what some people refer to as “bottom-up”. The economy is a product of the many. (3)
-Back to the Future-
Most economies that existed prior to the year seventeen hundred were economies of the few. Kings, queens, despots and the like were common. However, after the year seventeen hundred spontaneous/emergent order had produced an overwhelming and unstoppable force of the many. The many wanted to act as free individuals and freely pursue their individualistic needs, wants, talents and desires. The result, the ensuing growth, on a global scale was and still is astounding. (4)
Some two hundred and thirty years into the “bottom-up” revolution a small secondary group emerged known as the predator class which some refer to as the political class. A predator class in that their existence depends to one degree or another, consequent to, preying upon other people’s money:
“The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves" - Milton Friedman (5)
-Political Slight of Hand-
The predator class depends greatly on political slight of hand as they cloak their activities as being directed toward the many. But in essence their activities, in the main, boil down to the plans of the few superseding the plans of the many. James and Jane Goodfellow have been superseded. One ends this exercise with an economy that moves back toward the direction of kings, queens and despots, with political solutions as the only solutions, as political solutions are the predator class bread and butter:
Perhaps the greatest achievement of market economies is in economizing on the amount of knowledge needed to produce a given economic result. That is also their greatest political vulnerability. The public can get the economic benefits of such systems by judging results without understanding processes. But in their political behavior, the public must judge processes - including economic processes of which they may be ignorant or misinformed. Public misunderstandings can lead not only to misinterpretations of economic benefit as harm, but to actual harm resulting from policies designed to “correct” perceived problems. Once the process is underway, every perceived problem - whatever its reality or origin - calls for political solution, and these “solutions” tend to create a never-ending supply of new problems to be “solved”. - Thomas Sowell (6)
-Welcome to Cronyland-
Returning to Greensboro: Welcome to Cronyland where the only room available is for the plans of the few, and not so incidentally, plans that benefit the few. In Greensboro’s particular case, from coliseum to music hall and all the empty industrial parks in-between, to the use of taxpayer dollars to attempt to attract or retain firms that have grown to depend on crony handouts, the many pay and the few receive.
Cronyland is a bust for the many and a boom for the few.
Politicos and their ilk come up with master plans (more succinctly notional propositions), financed by the many and their associated tax dollars. The supposed master plan, which generally are far outside their field of expertise of the sponsoring politicos, are then advertised as a panacea. When that plan fails, and the known-known cascading unintended consequence mount related to the notional proposition playing out, a new master plan appears. Yes, the new plan will cause things to be different this time. Alas, same result. Then yet another master plan appears and so on it goes with an unending chain of master plan failure. And when the failure occurs, yet again, the excuse is: You can't make mistakes if
it's everybody else's fault. (7) (8) (9)
“The plans differ; the planners are all alike…” - Frédéric Bastiat
"That illustrates a general rule: If a private enterprise is a failure, it closes down - unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find an exception." - Milton Friedman, from the essay Why Government is the Problem
“Government is the only enterprise on earth, that when it fails, it merely does the same thing over again, just bigger” - Don Luskin
Notes:
(1) Mass Flourishing, Edmond Phelps
http://www.amazon.com/Mass-Flourishing-Grassroots-Innovation-Challenge/dp/0691158983/ref=sr_1_1?s=books&ie=UTF8&qid=1419451306&sr=1-1&keywords=mass+flourishing+how+grassroots+innovation+created+jobs+challenge+and+change
(2) F.A. Hayek, The Constitution of Liberty. Chicago: University of Chicago Press
http://www.amazon.com/Constitution-Liberty-Definitive-Collected-Works/dp/0226315398/ref=sr_1_1?s=books&ie=UTF8&qid=1419451353&sr=1-1&keywords=The+Constitution+of+Liberty
(3) Mass Flourishing, Edmond Phelps
(4) Why Does 1% of History Have 99% of the Wealth? McCloskey
https://www.youtube.com/watch?v=a0nsKBx77EQ
(5) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11
http://www.amazon.com/invisible-economics-politics-Inaugural-Singapore/dp/9971902222/ref=sr_1_7?s=books&ie=UTF8&qid=1419451445&sr=1-7&keywords=The+Invisible+Hand+in+Economics+and+Politics
(6) Knowledge and Decisions, Thomas Sowell, p. 69
http://www.amazon.com/Knowledge-Decisions-Thomas-Sowell/dp/0465037380/ref=sr_1_1?s=books&ie=UTF8&qid=1419451538&sr=1-1&keywords=Knowledge+and+Decisions
(7) This Time is Different, Eight Centuries of Financial Folly, Reinhart and Rogoff
http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640/ref=sr_1_1?s=books&ie=UTF8&qid=1419461465&sr=1-1&keywords=This+Time+is+Different%2C+Eight+Centuries+of+Financial+Folly%2C+Reinhart+and+Rogoff
(8) The Vision of the Anointed, Self-Congratulation as a Basis for Social Policy, Thomas Sowell
http://www.amazon.com/Vision-Anointed-Self-Congratulation-Social-Policy/dp/046508995X/ref=sr_1_1?s=books&ie=UTF8&qid=1419475448&sr=1-1&keywords=The+Vision+of+the+Anointed
(9) No, They Can’t, Why Government Fails but Individuals Succeed, John Stossel
http://www.amazon.com/They-Cant-Government-Fails-But-Individuals/dp/1451640943/ref=sr_1_2?s=books&ie=UTF8&qid=1419475565&sr=1-2&keywords=No%2C+They+Can%E2%80%99t%2C+Why+Government+Fails+but+Individuals+Succeed
“Guilford County will drop from the state's top tier in economic development rankings next year, the N.C. Commerce Department announced last week.
I suppose that's a good thing, because the county will qualify for more economic development assistance from the state for attracting new businesses.” - Doug Clark, Guilford drops in Commerce rankings, Greensboro News and Record, 12/02/2014
Upon further review, “…the county will qualify for more economic development assistance from the state..”, the statement thereof, is incomplete. That is, the state doesn’t have anything to give, be it economic development assistance or otherwise. State can only take from A and give to B. (1)
Therefore, exogenous and local taxpayers, represented by A, will then direct the same or more of their taxes to B. However, B is not a series of all individuals in Guilford County as depicted above by: “the county will qualify”. The many receive zero.
The few, represented by B, receive additional taxpayer dollars. B is actually politicos through the mechanism of government within the political taxing authority known as Guilford County. Hence the more complete statement would be: Guilford County politicos will qualify.
Considering the clarification stated above, one then arrives at: “…for attracting new businesses.” The statement implicitly and explicitly assumes new business is attracted, in the main, by A (taxpayers) giving to B (politicos) that in turn gives to C (new businesses). That somehow, in some way the resources given up by A and the use thereof, creates less economic value than the same resources given to B who then bestows upon C and the use thereof. Surely A must create less than B and C or why else go through the exercise? -Or- is the exercise merely for the benefit of B and C?
Which then leads one to this question: Would A, with tax money in hand, which otherwise would have been taxed for “economic development”, spend such money in a very effective/efficient manner? -Or- does B bestowing to C, by coercively extracting tax from A in the name of “economic development”, spend the same monies in a more effective/efficient manner? Would A create as much or more “economic development” than B and C? (2)
Now coming full circle, if B bestowing to C is in fact the most efficient proposition for “economic development”, and B has been bestowing to C for a very long time, then how did the following come to pass: “Guilford County will drop from the state's top tier in economic development rankings…”??
What if B and C did not exist and merely A was left to its own devices? How about Green Street in Manhattan? Huh?
Green Street was a residential neighborhood in the 1850, became a street with many brothels in the 1870’s, became a garment manufacturing center around 1900 then went into a long demise circa 1920. After World War Two New York City economic development planners wanted to level the area and put in “planned development”. The planners were unsuccessful and around 1990 Green Street rose from the ashes when it became inhabited by artists looking for large square footage work areas (the old garnet manufacturing buildings). The artists then gave way to trendy shops and today “lofts” above the shops sell for several million dollars each. (3)
Notes:
(1) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11.
http://www.amazon.com/invisible-economics-politics-Inaugural-Singapore/dp/9971902222/ref=sr_1_1?s=books&ie=UTF8&qid=1417894534&sr=1-1&keywords=The+Invisible+Hand+in+Economics+and+Politics%2C+Milton+Friedman
(2) The Four Ways Money is Spent, Milton Friedman.
http://politicalinfographic.blogspot.com/2012/12/the-four-ways-money-can-be-spent-by.html
(3) The Tyranny of Experts, William Easterly, 2013, pages 175-190.
http://www.amazon.com/Tyranny-Experts-Economists-Dictators-Forgotten/dp/0465031250/ref=sr_1_1?s=books&ie=UTF8&qid=1417894686&sr=1-1&keywords=the+tyranny+of+experts+economists+dictators+and+the+forgotten+rights+of+the+poor
