Friday, February 06, 2009

When You Have Lost the New York Times...

Even the New York Times is discussing the failure of mega-government spending to stimulate the economy.

Most Japanese economists have tended to take a bleaker view of their nation’s track record, saying that Japan spent more than enough money, but wasted too much of it on roads to nowhere and other unneeded projects.

Dr. Ihori of the University of Tokyo did a survey of public works in the 1990s, concluding that the spending created almost no additional economic growth. Instead of spreading beneficial ripple effects across the economy, he found that the spending actually led to declines in business investment by driving out private investors. He also said job creation was too narrowly focused in the construction industry in rural areas to give much benefit to the overall economy.

11 comments:

Lonnie Bruner said...

Great article. But I wouldn't go as far as saying "lost". How about this:

"In a nutshell, Japan’s experience suggests that infrastructure spending, while a blunt instrument, can help revive a developed economy, say many economists..."

Or this:

"Moreover, it matters what gets built: Japan spent too much on increasingly wasteful roads and bridges, and not enough in areas like education and social services, which studies show deliver more bang for the buck than infrastructure spending."

President Obama has said he doesn't want to spend money on bridges to nowhere; that's what your girl Palin wanted. Remember?

Also:

"proponents of Keynesian-style stimulus spending in the United States say that Japan’s approach failed to accomplish more not because of waste but because it was never tried wholeheartedly. They argue that instead of making one big push to pump up the economy with economic shock therapy, Japan spread its spending out over several years, diluting the effects."

In the end, I hope our technocrats heed the example of Japan and do it differently. But honestly, I DO think there's a great chance that large chunks of money will be wasted. That's where we agree -- it's just that you seem to think it will ALL be wasted.

Lonnie Bruner said...

Also, the same Dr. Ihori you quote said this further down the article: "Dr. Ihori said the United States appeared to be striking a better balance by investing in new energy and information-technology infrastructure as well as replacing aging infrastructure."

Zappa said...

Gee, where is Krugman hiding?

James B. said...

Well, OK, maybe "lost" is a strong word, but when the New York Times in any way even implies that the government is not the solution to all our problems, it is quite a surprise.

And yes, I am well aware that others say it will be better. That is always the hubris of politicians. "OK, well it has never worked before in history, but WE really know what we are doing. We are going to do it better."

Lonnie Bruner said...

Bashing the NY Times. Man, you are a textbook right winger, aren't you.

btw, good job on the latest "radio" "debate" with the Troofers. I cannot believe you had the nerve to sit through over an hour and a half of that.

James B. said...

Oh, this is coming from the guy who immediately dismisses an article by two economic professors, because it was published in the WSJ...

Bermas wouldn't stop talking. I was starting to get rather annoyed towards the end.

Lonnie Bruner said...

Correction: I dismissed the editorial page of the WSJ. Turns out it wasn't even in that section and I admitted I was wrong. No problem with the WSJ. My export business wouldn't do very well without free-ish market capitalism, trust me.

Lonnie Bruner said...

James,

You ever read Beckner-Posner blog? They have an exellent analysis against CEO pay caps: link.

James B. said...

No, I hadn't. Becker is a great economist, thanks for pointing that out. While I agree in general, some of the points I am not so sure on. I think blaming the Fed is an overly simplistic (and all too common) argument. The Fed only sets short term lending rates, not the long term bond rates which affect mortgage rates. If the Fed sets short term rates too low too long, it should actually push up long term rates along with inflationary expectations. China was more responsible for low long term rates than the Fed was.

I agree economically that there shouldn't be all these restrictions, mostly because they are so easy to get around, but I have no sympathy for the executives who might get their pay cut. If you accept government money, you accept government authority. They had a choice, the rest of us don't.

James B. said...

Becker has more to say on this. Although since it is in the Wall Street Journal, you can safely dismiss it.

http://online.wsj.com/article/SB123423402552366409.html

Lonnie Bruner said...

Interesting point on the Fed. I have a Libertarian friend (and hardcore Troofer, btw) who I constantly debate about the Fed. He's claiming that the result of the whole crisis is the Fed's low rates (which is funny, considering that Greenspan was an Ayn Rand acolyte).

But certainly the Fed DOES have a direct effect on people's buying houses. I bought a house last February when Bernanke was dropping rates. Each day/week during that process brought potential savings for me of hundreds of dollars per month until I locked in.

If the Fed had raised rates, there would have certainly been a drop in demand for housing, but until now, they've only raised rates to stave of inflation, and it's been low for so long. I think people put unnecessary blame on the Fed; in reality, the crisis is due to many things.

Yea, I'm glad Obama limited exec pay, even though it may do nothing, or make things worse. It strikes me (and most people) on a gut level.