tag:blogger.com,1999:blog-7820485130017459619.post7456216745706628431..comments2023-10-24T01:46:47.151-07:00Comments on CynicusEconomicus: Structural Change - The Necessary PainUnknownnoreply@blogger.comBlogger16125tag:blogger.com,1999:blog-7820485130017459619.post-16224161063440837322010-07-12T00:08:48.556-07:002010-07-12T00:08:48.556-07:00"No, it wouldn't.
If fact it would be mor..."No, it wouldn't.<br />If fact it would be more less efficient.<br />Take highways: you would have competing highways to the same city wasting resources and then pushing the cost of transport up because the private sector must get a profit on the highways. A public planned highway efficiently builds one highway and makes it free for use.<br />Also, take the highly expensive and inefficient US medical care system. It's largely inefficient because of the private part of it: bloated management in for-profit HMOs that ration health care by wasting resourses in pouring over people's policies to deny them payment to people to increase profits."<br /><br />Yes it would.<br /><br />How can you be sure there would various highways and not only one? Also, in my country, Spain, the government takes care of building the roads, and it has double roads to several places because it has one toll highway and another non-paying road. Also, historically when the voluntary sector has built roads it has done by forming cooperatives of the locals. Your answer does not make sense.<br /><br />And the USA health system is a red market, a government controlled market. Its obviously inefficient. Go back in history to when the USA government started regulating the USA health care system and you will see that it exactly when costs started rising.<br /><br />You can not go around saying that government regulations are good and then criticize a heavily regulated system as an example of what you dont support.Hugonoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-59604311116594947032010-07-11T23:17:15.238-07:002010-07-11T23:17:15.238-07:00Methinks everyone is being too absolutist in the ...Methinks everyone is being too absolutist in the position they adopt. <br /><br />Would the private sector provide roads more or less efficiently than the public sector? The only true answer is "possibly, but no one can know for certain, it all depends on how its done." <br /><br />Would privately organised and administered hospitals use money more efficiently than NHS hospitals? Possibly, but no one can know for certain, it all depends on how it's done. <br /><br />To ask the same question in reverse: would GP services be cheaper and more efficient if all GPs were direct employees of the State (rather than the current position of most being employees of privately owned and run GP practice companies)? The answer is the same. <br /><br />Roads, medical services, education, policing, armed forces and many other things done by government have to be done by someone and they have to be paid for. They are genuine value-added services whether they are run by government or privately and whether they are funded out of tax or in another way. <br /><br />The unsustainable part of government spending is in two parts. <br /><br />First, the additional costs (if any) of providing these services through government rather than by private service providers. My inference is that there are additional costs because there are few if any incentives to operate more efficiently. To my mind the only way to approach this issue is to require the managers in the public sector to maintain current levels of service whilst cutting their budget. Allowing them to reduce the level of service provided to the public must not be an option. That you or I might not know how savings can be effected is neither here nor there; when backs are against the wall and savings have to be found they will be found. They are found all the time in the private sector by paring-back bureaucratic processes that do not directly add value. <br /><br />Secondly, those areas of government spending that add no or little value must be discarded entirely as unafforable luxuries. I mean such things as (i) talking-shop Quangos, (ii) "carbon budget" calculators, (iii) swathes of people employed to tell us what to eat and drink, (iv) subsidies to the arts and to professional sports bodies (the government pays millions each year to the multi-billion pound football industry, it's complete madness) and (v) "equality and diversity" regulation (what is needed is clear laws and enforcement of breaches not layers of paper-pushing regulators sending out questionnaires and "guidance"). <br /><br />How far these two steps go in reducing the overdraft will determine whether any of the value-added services should be reduced on the ground of unaffordability. <br /><br />Lord Keynes is correct in saying that private debt is a serious problem but he is wrong in suggesting that it is somehow nothing to do with the previous government. Of course it is primarily the fault of those who borrowed money they cannot now readily afford to repay. But the previous government took no step to limit private debt, presumably because the extra spending brought in extra taxes that could be used to pay for some of their additional spending plans, despite being warned by many observers that there was a serious underlying problem. Those spending plans appeared to be affordable only because of the unsustainable private borrowing. It follows from this that part of government spending is necessarily unsustainable because it is dependent on unsustainable private sector activity.TheFatBigothttps://www.blogger.com/profile/17255526385076528633noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-44577772597142831372010-07-11T18:37:35.851-07:002010-07-11T18:37:35.851-07:00But if the government was not taking away those re...<i>But if the government was not taking away those resources, the voluntary sector could provide those services in a more efficent way, so everything would be cheaper.</i><br /><br />No, it wouldn't.<br />If fact it would be more less efficient.<br />Take highways: you would have competing highways to the same city wasting resources and then pushing the cost of transport up because the private sector must get a profit on the highways. A public planned highway efficiently builds one highway and makes it free for use.<br />Also, take the highly expensive and inefficient US medical care system. It's largely inefficient because of the <b>private</b> part of it: bloated management in for-profit HMOs that ration health care by wasting resourses in pouring over people's policies to deny them payment to people to increase profits.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-46005320590616479732010-07-11T12:17:25.422-07:002010-07-11T12:17:25.422-07:00Sorry, but I also meant to acknowledge Hugo's ...Sorry, but I also meant to acknowledge Hugo's comments in my previous comment.Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-23660314004309795942010-07-11T12:15:24.502-07:002010-07-11T12:15:24.502-07:00Most employees of the government do things of enor...<i>Most employees of the government do things of enormous objective value to the community and business: maintaining law and order/ enforcing contracts, healing the sick, building public infrastructure, education, R&D – this is ALL effectively a subsidy to the private sector that makes the cost of their private business far less expensive. Get rid of it and private costs would shoot through the roof.</i><br /><br />CE, was it you who once wrote of your experiences working in the UK for some sort of government-funded agency designed to promote links between a university and local businesses? There can never be any scientific proof of the incorrectness of Lord Keynes' assertions above, but I found your experiences (if it was you) very persuasive! I seem to remember something about your department providing free web services for local businesses, which undercut local web designers and yet wasn't up to a professional standard, so businesses always tried the free services first and then went to the professionals later - a total waste of time and effort. And wasn't there something about providing incredibly expensive receptions at the university to promote cooperation with local businesses which were of no identifiable benefit to anyone? <br /><br />When you hear stories like these you just know that this sort of thing is being repeated thousands of times up and down the country, but it would be impossible to prove it to Lord Keynes' satisfaction.Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-69876960311077703452010-07-11T04:09:05.233-07:002010-07-11T04:09:05.233-07:00English is not my native language, so forgive any ...English is not my native language, so forgive any mistake.<br /><br />Response to Lord Keynes,<br /><br />"Most employees of the government do things of enormous objective value to the community and business: maintaining law and order/ enforcing contracts, healing the sick, building public infrastructure, education, R&D –"<br /><br />First of all, nothing is of objective value. But it is true that some things that the government do has value (at least percieved by most people, including me). But that is not the point. The real issue is asking if the voluntary sector would do it in a better way. You have to think that the government takes away resources from the voluntary sector by force and then does things with them. This is going to produce some value (it would be outrageous if it did not), but it does not mean that if those resources where left to the voluntary sector it would not create more value, or do the same the government does using a lot less resources. In fact, this almost always the case.<br /><br />"this is ALL effectively a subsidy to the private sector that makes the cost of their private business far less expensive. Get rid of it and private costs would shoot through the roof."<br /><br />This is terribly falacious. The government is taking resources away from the voluntary sector (taxes) and then giving them some services (you call it a subsidy). But if the government was not taking away those resources, the voluntary sector could provide those services in a more efficent way, so everything would be cheaper.<br /><br />Explained in another way, if the government would not provide this services (subsidy) but did not take money away from the voluntary sector, the voluntary sector could pay for those services with this money the government is not taking now, and they could even get those services in a more efficient way, thus making everything cheaper.Hugonoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-15958499750316792152010-07-10T21:06:51.079-07:002010-07-10T21:06:51.079-07:00Neil Wilson,
A brilliant point. The existence of ...Neil Wilson, <br />A brilliant point. The existence of a number of productive nationalised industries also demonstrates that governments can create value, e.g., China National Offshore Oil Corporation, Anshan Iron and Steel Corp., CODELCO, Petrobras, Singapore Airlines, PSA International, Neptune Orient Lines, Chartered Semiconductor Manufacturing, Sing Tel, SembCorp.<br /><br /><b>Response to Lemming</b><br /><br /><i>"Keynes showed that in times of recession it really is best to pay one man to dig holes and another to fill them in order to stimulate demand", or words to that effect. I suspect that a majority of people believe this to be true.</i><br /><br />This is the usual <i>reductio ad absurdum</i> argument trotted out by anti-Keynesians. Name me one person who <b>seriously</b> advocates it. Moreover, Keynes said nothing of the sort either: he facetiously said that if people <i>were not able to do anything else</i> then they could do that, but never seriously advocated it.<br /><br />Most employees of the government do things of enormous objective value to the community and business: maintaining law and order/ enforcing contracts, healing the sick, building public infrastructure, education, R&D – this is ALL effectively a subsidy to the private sector that makes the cost of their private business far less expensive. Get rid of it and private costs would shoot through the roof.<br /><br /><i> The problem is that we start from a fait accompli where the welfare state already exists and appears to work, and people cannot comprehend that perhaps it was an unsustainable system all along.</i><br /><br />As I said above, there is no proof at all that it’s “unsustainable.” There has been a very fundamental link between the public sector and the private sector in all countries since the advent of the mixed economy back in the 1930s.<br />The fundamental flaw with the fixation on the public sector is ignoring excessive <i>private debt</i>. The consumption expenditure of people with excessive private debt also consumes domestic non-tradable goods and services, domestic tradable goods and services and imports. <br />Given that aggregate demand was artificially boosted by excessive private debt, it’s the dysfunctional financial system that ought to be the main target for blame, not the government, whose social services, education, R&D etc is a boon to the economy.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-46093223422143415732010-07-10T17:46:17.200-07:002010-07-10T17:46:17.200-07:00Lemming: I really like the bit about paying tax......Lemming: I really like the bit about paying tax.....using money that is borrowed which means that somebody later will be paying that tax....net tax contribution over the long term = 0Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-68870000431294009932010-07-10T17:42:09.182-07:002010-07-10T17:42:09.182-07:00Anonymous: A quite reasonable point. The short ans...Anonymous: A quite reasonable point. The short answer is 'yes' which is why I gave the case of the nurse creating output. I hoped that I had illustrated that I accepted that **some** government activity does create output, but perhaps I was not clear enough.....Markhttps://www.blogger.com/profile/14983165364072918091noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-42023503739777120472010-07-10T16:16:24.286-07:002010-07-10T16:16:24.286-07:00But sadly - they WILL blame the cutters. They alw...But sadly - they WILL blame the cutters. They always do. And so, in due course, we'll get another round of the "angelic" spenders to start the whole mess again.Steve Tierneyhttp://www.stevetierney.org/blognoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-16733010138715580982010-07-10T15:03:59.657-07:002010-07-10T15:03:59.657-07:00Cynicus, you distinguish between different parts o...Cynicus, you distinguish between different parts of the private sector, but not between different parts of the public sector. Should not those parts of the public sector that produce goods and services (e.g. education, road maintenance) be analysed differently from those that merely transfer resources?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-3575658748394460502010-07-10T03:54:25.656-07:002010-07-10T03:54:25.656-07:00" They will be angry at the government that h..." They will be angry at the government that has made the cuts. However, I would argue that this is a misplaced anger. The anger should be directed at a government that created an unsustainable job in the first place..". I agree. But will a public that was stupid and ignorant enough to vote New Labour three times be capable of making the distinction?deariemenoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-30693396575623013722010-07-10T03:15:57.878-07:002010-07-10T03:15:57.878-07:00The idea there are going to be 'cuts' in g...The idea there are going to be 'cuts' in government spending is nonsense. Spending under the new govt plans will be 9% higher in 2014/15 than now. Some cuts. <br /><br />Admittedly some of that extra spending will be on servicing the debt, but there are not going to be swathing budget cuts. That doesn't mean that lots of high profile services won't be cut - the standard public sector response to not getting as much money as they want is not to improve efficiency and provide the same service but at lower cost (as the private sector tries to do) but to cut front line services in order to put pressure on politicians to increase spending again.<br /><br />Expect plenty of this in the next few years.sobersnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-67776613763184440922010-07-10T03:04:47.079-07:002010-07-10T03:04:47.079-07:00CE
You'd have loved one of the panellists on ...CE<br /><br />You'd have loved one of the panellists on Question Time the other night. He pontificated: "Keynes showed that in times of recession it really is best to pay one man to dig holes and another to fill them in in order to stimulate demand", or words to that effect. I suspect that a majority of people believe this to be true. I have had numerous conversations with intelligent people who think that anyone employed by the government is not a burden on the economy because at least they are doing something slightly useful and paying tax that can, of course, be used to build schools'n'hospitals. <br /><br />The problem is that we start from a fait accompli where the welfare state already exists and appears to work, and people cannot comprehend that perhaps it was an unsustainable system all along. I don't think that many people can handle the idea that it may take decades or even entire lifetimes for the consequences of certain decisions to finally arrive; most people think that economic performance can be measured and acted upon in real time. When 'the cuts' inevitably result in reductions of GDP and an increase of debt-to-GDP ratio (as they will), many people will take this as hard, scientific proof that the spending should have continued. One of your more prolific commenters has already declared this as true for Ireland, as its debt-to-GDP ratio has risen following cuts in government spending.Lemmingnoreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-77878208011510730792010-07-10T00:56:14.896-07:002010-07-10T00:56:14.896-07:00The anger should be directed at a government that ...<i>The anger should be directed at a government that created an unsustainable job in the first place or, put another way, a government that sought to consume more overall than the economy could sustain.</i><br /><br />There is no convincing evidence that public sector jobs were “unsustainable” in the first place. <br /><br />I suppose the “proof” is that the UK has a current account deficit.<br /><br />In 2005, the UK had £49.4 billion trade deficit. But 35.8% of this trade deficit was paid for by 17.7 billion pounds in the net foreign factor income, since UK residents own a <i>huge</i> amount of foreign assets themselves, and the UK mostly gets a positive investment return on its ownership of foreign assets. The current account in 2005 was thus £31 billion or about 2.5% of GDP. This was paid for by a capital account surplus. Despite repeated current account deficits, the UK still gets more in foreign factor income than foreigners get from the UK. All the evidence suggest that the UK current account deficits are sustainable:<br /><br />http://www.nuffield.ox.ac.uk/users/nickell/papers/TheUKCurrentAccountDeficitandAllThat.pdf<br /><br />If the UK was really “living beyond its means” it would have a balance of payments crisis.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-7820485130017459619.post-13415694329597114612010-07-09T23:29:17.911-07:002010-07-09T23:29:17.911-07:00This is based upon an ideology that the private se...This is based upon an ideology that the private sector is the only thing that creates value. That is not the case. It is only because the public sector we have created tends to concentrate on 'social' added value.<br /><br />Plus a nurse fixing an injury can return an individual to the production of surplus, whereas the death of the individual would remove that surplus production ability permanently. And of course our moral values don't allow the culling of injured individuals which would be the other approach (although throwing them into the mental torture of unemployment appears perfectly acceptable for some reason).<br /><br />It is perfectly possible for the public sector to deploy capital to grow food and build houses. The money to do that is simply created, and the demand for the money ensured by legally enforced taxation. In such a public sector owned operation, the individuals are still adding value and still creating a surplus in primary production. That frees off others to work in secondary production. Very soon you have China.<br /><br />So the myth that the 'public sector' is not productive is merely truth by repeated assertion from, surprise, surprise, the owners of private production who don't want the competition.<br /><br />Remember that we only have unemployment (and an advanced economy!) because we have money and taxation. <br /><br />Unemployment is there as a suppression on labour costs that drives more money to capital rather than labour. It is a buffer stock at a very low consumption value which for some reason we pay to remain idle. The individuals in that buffer stock suffer measurably.<br /><br />Quite why we pay the unemployed in the way we do I don't know. Either you pay people enough to keep them out of poverty and create enough 'buffer jobs' to get at least some value out of them for the money, or you pay them nothing and let them suffer properly. Paying somebody to be idle is ridiculous.<br /><br />Yes the Labour Government utterly failed to deploy the public sector resources effectively and unbalanced everything, but cutting the costs of government will remove that demand from the economy and that will cause more and more people to fall into the 'buffer zone' of unemployment. You will get a deleverage effect that will cause many more to fall into the zone than have been cut.<br /><br />What should have happened is that the 'buffer' should have been improved first to ensure those in it do not fall into poverty. <br /><br />For example if you replaced benefits with a universal pension (payable to those 'productively engaged), and eliminated the minimum wage, then all the public sector jobs you 'cut' could simply be turned into volunteer positions. The savings would then be the difference between the 'universal pension' and the excessive New labour wage paid (less a bit for admin costs).<br /><br />And of course the private sector would then create jobs in the current 'dead zone' between volunteer and minimum wage.<br /><br />The result is that individuals may move from a higher standard of living to a lower one, but importantly they are still engaged in production - maintaining skills - and not in abject poverty.<br /><br />The pain may be necessary (to ensure that the output of the public sector is worth the money), but it doesn't need to be as acute for individuals as it is going to be.Neil Wilsonhttps://www.blogger.com/profile/18178155357632397049noreply@blogger.com