22 January 2009

Infrastructure, for real this time

Here's Gary Becker (via Greg Mankiw):
Some of this infrastructure spending may be very worthwhile-I return to this issue a bit later- but however merited, it is difficult to believe that they would provide much of a stimulus to the economy. Expansion of the health sector, for example, will add jobs to this sector, but it will do this mainly by drawing people into the health care sector who are presently employed in jobs outside this sector. This is because unemployment rates among health care workers are quite low, and most of the unemployed who had worked in construction, finance, or manufacturing are unlikely to qualify as health care workers without considerable additional training. This same conclusion applies to spending on expanding broadband, to make the energy used greener, to encourage new technologies and more research, and to improve teaching.
That point isn't being made enough. Labor was much more homogeneous during the Great Depression than it is now. Luckily your humble narrator has a (partial) solution: hire a few thousand of those out of work financial employees to teach economics and personal finance to high school students. It's a large pool of out of jobless workers and pairs them up with a job they are at least semi-qualified for. They can't be any less qualified than the uninformed social studies teachers who usually seem to get thrust into econ classes. Maybe if we teach enough kiddies that cash-out, negative amortizing ARMs are a dangerous thing to play with then we won't get into this mess again next generation.

Becker also has this to say:
Putting new infrastructure spending in depressed areas like Detroit might have a big stimulating effect since infrastructure building projects in these areas can utilize some of the considerable unemployed resources there. However, many of these areas are also declining because they have been producing goods and services that are not in great demand, and will not be in demand in the future. Therefore, the overall value added by improving their roads and other infrastructure is likely to be a lot less than if the new infrastructure were located in growing areas that might have relatively little unemployment, but do have great demand for more roads, schools, and other types of long-term infrastructure.
Any guess whether the Stimulus Junta will lean towards putting things where they'll add value or where they'll get the biggest political swing?

One of the things that's always struck me as being particularly Rust Beltish about South Bend is that the streets downtown are just too broad. Some are six lanes wide, all going one way. It's like someone laid down this heavyweight asphalt skeleton expecting a booming industrial town to grow in around it but the town is permanently stuck three weight classes down.

1 comment:

  1. Maybe if we teach enough kiddies that cash-out, negative amortizing ARMs are a dangerous thing to play with then we won't get into this mess again next generation.

    There is a dark part of me that thinks maybe ... just maybe ... Our Betters like us ignorant.

    We're easier to push around that way.

    What did that report say a generation ago about our public schools? That they could not be worse if our enemy had designed them?

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