Henry Hazlitt's classic "Economics in One Lesson" is now available on line.

If everyone read (and absorbed) this, the world would be a much smarter place.

[via Lynne Kiesling, who's apparently (and apparently happily) in Paris for a few weeks]

This is an interesting piece, but it also seems to miss a few points. I'm still reading it, but the piece on government spending misses two items that change the value proposition in government spending.

1) Cash has a variable value to a person. Essentially, $1 to a person that makes $100K in the city (where one dollar buys a previously owned piece of chewing gum from a sidewalk vendor...) is less than the value of $1 to a person that makes $10,000 in the Arizona Desert. This means that taking a small amount from the high earners and giving it to the lower earners does show a net gain to society - of course there is no practical method of calculating these values, so different people may have different feelings for what "small" means!

2) There are various large government projects that would not be undertaken by private enterprise. The example given was building a dam. The dam lowers the cost of energy across the entire country through trickle effects, but I know of no private company that has attempted a large dam. I think that may be because the barriers to building a dam are primarily political, but I'm not really sure. To move the example closer to home, why (in the 1960s to eliminate flames) was government involvement necessary to get into space? What does the government bring that makes it more economical for them than for a private corp? (Or should they not have gone?)

Interesting paper, though. In general I agree with it, but the devil is in the details!

-David

I don't know if anyone is interested, but I guess I'll put more commentary up here as I read this document.

About farming subsidies - good points are made about the inefficiencies created by the government propping up farmers, leading to surplus, extremely low prices, etc. What I believe is missed in the analysis is the risk factors. If we have a "bad year" when we are producing twice what we need, prices may rise a little, but not by much. If we have a "bad year" when our typical production matches our need - prices skyrocket, people starve to death in mass, there is war in the streets over food. Thus the risk incured by overproduction is far lower than the risk incured by trying to match production to usage. A free market would inherently run to match - and because of how long it takes plants to grow the recovery period driven by prices would be after considerable problems had already been caused. (Perhaps this is solved by dirivite markets, perhaps not).

His points are valid (in that the government is playing favorites, will choose a sub-optimal solution, etc.) but that still needs to be balanced against the risk tradeoff.

-David Summers

Another comment - you can also look at the government involving itself in market money supply (lending, etc.) as trying to adjust the risk tolerance of the market. If current market conditions are such that the market is not being risky enough for desired market growth, then the government stepping in can artificially raise the risk tolerance of the market. Of course, now you are trusting that the government knows how much risk should be taken - but often I think individuals tend to be too risk adverse. We are cowards alone, and lions in packs.

-David

I agree with you that government is necessary for making something like large dams which provide benefit for all. The thing is this involves forced removal of property from individuals, something most libertarians will not be comfortable with.

Regarding space launch I am a bit more skeptical. In Germany before WWII many private groups tried to develop rocketry, to be forbidden by governmental regulations installed by the Nazis. The Nazis banned private rocket development turning it into a state military monopoly. These regulations were never repelled properly for several reasons, mostly due to nanny state safety concerns. This caused people like Ortag to move his business to African countries, increasing his costs, and made him persona non grata when he accepted funding by people like Qadhafi because no one else would fund him.

So people did try, especially in Germany. But state laws in the countries with enough of an industrial base have prohibited commercial space by imposing draconian restrictions or directly forbidding its development.

The United States is presently slowly lifting these restrictions, which is most positive. Other countries with large areas of wilderness could also be viable candidates, the closer to the equator the better. I am surprised we have not heard more about rocket launches from Australia. I guess their industrial base is not quite up to snuff on that front.

A minor correction to my last comment: its Lutz Kaiser and the corporation name was OTRAG.

I could talk about more missed lost cost space launch opportunities by persona non grata by mentioning the late Gerald Bull and superguns.

I am of the oppinion that gun research is being neglected in the search for new fangled expensive toys such as missiles and railguns.

The British had artillery rockets in the XIXth century, heck the Chinese had them for yonks. Yet cannon were more used. For several reasons, and accuracy, contrary to what some people may think, was not the only one. Guns are cheap, because most of the cost is in the gun per se, making the kill device which is used often, the bullet, cheap. The only problem is that they are too heavy for many applications, but new technology is taking care of that.

Ignore gun technology at your own peril. I am certain some of the less deep pocket future adversaries of the USA will not.