Stimulus, Public Works, and Other Waste

An American economist travelled to China to observe a canal project. The Chinese delegation showed him the plans and the model of everything that would be built along this new masterpiece. When they travelled out to the worksite, the economist was aghast at what he saw. The men were all using hand tools such as shovels, pick axes, and wheelbarrows.

The American economist asked the leader of the Chinese delegation, “Why on Earth are your people using hand tools? Why are there no bulldozers or other modern equipment?”

The leader of the delegation stood up straight and replied, “If we used that type of equipment, all of these men would lose their jobs in a couple of months.”

The economist rubbed his chin in thought and then smiled, “Oh, it’s a jobs program. Why don’t you take away their shovels and give them spoons?”

Anarchists don’t break windows… Keynesians break windows.

There are so many reasons to criticize stimulus and public works projects but let’s just focus on a couple of the main ones.

The money that is used for these projects comes from taxation which is also known as theft. The people that are looted for the purpose of funding these projects incur an “opportunity cost.” The money that was taken is money that the tax victim will NOT be able to use to build his business or take care of his family. The other way of looking at this is to say, “We see this project being worked on but what we don’t see is what would have been done without the government taking the money from people and businesses.” The business owner has more incentive to economize his scarce resources than the government because he is not guaranteed to get an inflow of cash through compulsion.

But surely, the government must build roads in order for businesses to exist. How would business get their goods to market without government roads? How would the customers get to the markets? Surely only the coercive power of the State can provide these valuable roads!

Building roads does not create commerce any more than throwing a hook and worm in a puddle creates fish. Commerce comes from the capital investment and actions of a market actor that provides a good or service that the public is willing to exchange their money for. It is not necessary for the government to build these roads as there is a long history of private roads. Carl Fisher built a private road that went from San Francisco to New York City and another from Canada to Miami without a single tax dollar or toll booth. This happened before the State monopoly of roads. In more recent times, business owners on the island of Kauai did their own road repairs because they could not afford to wait for the government to do it. here

The real fallacy of infrastructure projects is that it for the purpose of repairing roads and bridges that are in disrepair. It is not. It is only for the purpose of putting people to work, spending gobs of money, and putting up re-election signs that say, “The government built that.” If the real purpose was to repair these bad roads, there would be no projects for new roads, bridges,  bicycle paths, or animal crossings until the existing infrastructure was taken care of.

For the most part, these projects are nothing more than dig-a-ditch-fill-a-ditch programs. If you would not pay people out of your own pocket to dig holes and fill them back in, you should not support when the government does. Perhaps the question should change from, “Who will build the roads?” to “Does it really matter who builds the roads.”

Lou – Freedom Feens