STOCK MARKET WATCH - Tuesday, 31 January 2012

[Demeter]

8. Alex Tabarrok: Public goods, public goods, public goods!!!

http://noahpinionblog.blogspot.com/2012/01/alex-tabarrok-public-goods-public-goods.html

It is difficult to overstate the intensity of the warm glow that fills my heart to see Alex Tabarrok writing this in the pages of the Atlantic:

To build an economy for the 21st century we need to increase the rate of innovation and to do that we need to put innovation at the center of our national vision...Innovation, however, is not a priority of our massive federal government. Nearly two-thirds of the U.S. federal budget, $2.2 trillion annually, is spent on the four biggest warfare and welfare programs, Medicaid, Medicare, Defense and Social Security. In contrast, the National Institutes of Health, which funds medical research, spends $31 billion annually, and the National Science Foundation spends just $7 billion...

The federal government does spend some money on innovation, but mostly for innovation in warfare...The basic and applied non-weapons research that has the best chance of creating beneficial spillovers is a small minority of defense R&D. DARPA, the Defense Advanced Research Projects Agency, for example, helped to develop the Internet but DARPA's budget is only $3 billion. Even when we lump all federal R&D spending together regardless of quality it amounts to just $150 billion, a mere 4 percent of the budget...

Our ancestors were bold and industrious. They built a significant portion of our energy and road infrastructure more than half a century ago. It would be almost impossible to build that system today. Could we build the Hoover Dam today? We have the technology. We seem to lack the will. Unfortunately, we cannot rely on the infrastructure of our past to travel to our future. Airports, an electricity smart grid that doesn't throw millions into the dark every few years, and ubiquitous Wi-Fi are among the important infrastructures of the 21st century, and they are caught in the regulatory thicket...

To restore our economy and our spirits we need to become an innovation nation. An innovative nation would improve the prospects for economic growth but could do much more. The warfare-welfare state divides the pie and also divides Americans. Americans, however, are an innovative, forward-thinking people and the prospects are good for uniting them on a pro-growth, pro-innovation agenda.

In other words: PUBLIC GOODS PUBLIC GOODS PUBLIC GOODS!!!

Also known as "public investment," "government investment," "public capital," "government capital," "partially nonrival production inputs," etc, public goods have been a major theme of this blog.

To see Alex Tabarrok trumpeting the importance of public goods is particularly gratifying to me, since Alex writes for Marginal Revolution, a blog whose leanings I would characterize as "libertarian," and works for George Mason University, an institution whose intellectual climate I would characterize as "libertarian." Which means that this article is part of the growing libertarian push for public goods, which first came to my attention from Peter Thiel...

MORE DEVELOPMENT OF THE THEME AT LINK