The Government Creates no Wealth

[_Analytics]

Analytics,

You cannot have this discussion with Droopy and BC at all. But if you're going to have it with someone who understands basic econ as it's taught in school, then semantics are still going to be a problem.

Did you notice when bcspace recently bolstered his credibility by telling us about his credentials? Specifically, he has an undergraduate minor in Economics.

What do you have in mind when you envision the government "creating wealth?"

a) Can the government 'create wealth' by making a profit?
b) Can the government 'create wealth' by making profits better than private industry?

Or maybe there it means something else?

The creation of wealth is simply the creation of value. I don't think it has to be anymore complicated than that. If any entity—including the government—engages in an economic activity that creates value, then that entity has created wealth. It's true that there is an opportunity cost—if the government taxes me and uses the money to make sprockets, that precludes me from investing the same money to make widgets. And it's true that according to Droopy's religion (i.e. simplistic economic models with strong assumptions, including the precept that human beings are rational decision makers), the value of the widgets I would have made must be more than the value of the sprockets the government makes. But that doesn't negate the fact that the government's activity is still creating wealth—it's just creating less wealth than would have been created in the free market.

If a), the answer should be trivially, "yes". Maybe the most ignorant conservatives don't believe this. If the USPS has ever made a profit, then the government has "created wealth". But who cares?

The point of this is that I'm sick of hearing the phrase "the government can't create wealth" as an argument for conservatism. Not only is that phrase patently false, its implications aren't being embraced by the people who spout it. People who really believes that "the government can't create wealth" should be anarchists, not conservatives or libertarians.

[_Analytics]

A bridge, overpass, road, dam, levy, sewer system, sea wall etc. no matter how necessary and useful it may be, is not created wealth, it is shifted, transferred, reallocated, redistributed wealth, and represents wealth that manifests itself in one place (as a bridge) which would have manifested itself as some finished product or body of products in the private sector in another place had the state not commandeered the materials and labor that would have been used in the private sector and used it in the public sector to create something else.

Noooo!!!!! And just when I thought we were getting somewhere.

Using your definition, why doesn't the creation of a bridge represent a "productive economic activity that increases the overall stock of wealth above that which existed before such productive economic activity took place"?

[_Analytics]

If the government "shifts" $1million and builds a road that provides a benefit of $10million to a community, then they have "created wealth".

Yes, the original $1million may have been taken compulsorily, the $1million may have been better spent elsewhere (to benefit the community $50million), and private industry may have been able to build the same road for $500k, but all those issues don't change the fact that "wealth" has been "created".

It's okay to admit it.

I don't always agree with what your point of view, cinepro, but you are clearly a reasonable person.

[_Droopy]

If the government "shifts" $1million and builds a road that provides a benefit of $10million to a community, then they have "created wealth".

As I pointed out above, you are now playing a semantic game, which is not going to count as a logical argument unless you define your terms and their usage with some degree of rigor. You have also just played into the "you didn't build that" mentality of the Left, in which the state is the actual foundation and source of all wealth, and to which proper gratitude must then be shown.

Claiming that a government constructed bridge "provides a benefit" of $10 million to a community sounds little different than simply saying that the bridge's presence itself was the cause - the actual creative element itself - of that new $10 million, and hence, the bridge = government is to be understood as the actual source of the new $10 million. You see, you didn't really build that. The state did. You were just standing there waiting to pick up the acorns on the ground but you didn't have the baskets. The state gave you the baskets, and a bridge so you could get to the acorns that were on the other side of the bridge (as if private citizens and/or companies couldn't and wouldn't have built a toll bridge anyway if the acorns were really worth collecting).

A bridge does not "provide" x monetary "benefits" to a community. That is nothing more than the traditional thought processes and language of state worship. The free, creating, working, saving, and investing people of that community in a free, contractual, competitive market create the new $10 million. The bridge, at the very best, can be understood to have facilitated such wealth creation (just as a civil court system and body of contract law do) but to claim that the bridge can be understood as having, itself, by its presence, created $10 million of new wealth is to engage in logical slight-of-hand. The bridge did not, and does not represent a government creation of wealth since, without the people in that community actually saving, investing, working, and producing, the bridge represents nothing more than an artifact constructed of concrete and steel; public museum piece assimilated from transferred private capital.

A government constructed bridge can be said to facilitate, promote, encourage, foster, accommodate, mitigate, and potentially positively condition an economic environment toward greater wealth creation, but it cannot - and hence, government cannot - be said therefore to have created new, net wealth. The people of that community within competative free markets did that, not the state. The roads I use do not create new wealth. Those that use those roads, themselves created from private sector wealth, do create that wealth through productive economic activity (work).

The idea of politicians taking credit for the wealth created by the people of a society because of the core infrastructure they constructed out of preexisting wealth generated by that very private sector is morally and economically perverse.

Yes, the original $1million may have been taken compulsorily, the $1million may have been better spent elsewhere (to benefit the community $50million),

Or in vote-buying pork, or down the welfare state/poverty industry/special interest bureaucracy/corporate welfare sinkhole - just as, if not the more likely scenario.

and private industry may have been able to build the same road for $500k, but all those issues don't change the fact that "wealth" has been "created".

NO! The bridge itself is a shifting, a reallocation, not creation. The wealth that the private sector generates because the bridge is there is the only new net wealth "created" in the entire economic process. Government didn't create that new wealth, and can morally, ethically, and economically, claim no credit whatsoever for it.

Can they claim credit for facilitating or making new wealth creation more likely or removing some obstacle? Sure, let them take credit for that, but not for creating wealth, which the state cannot do by definition as government has no money. Everything government "owns" and utilizes, from tanks to paper clips was designed, created, constructed, and distributed from within the private sector with funds generated within that very sector. Government is purely parasitic in nature, by the very nature of government itself. If its confining itself to its limited constitutional functions, and staying within realms where it is at least nominally competent, then there is little to criticize save questions of efficiency and fraud.

It's okay to admit it.

"Oh Holy Father government, give us this day our daily bread..."

[_Droopy]

Using your definition, why doesn't the creation of a bridge represent a "productive economic activity that increases the overall stock of wealth above that which existed before such productive economic activity took place"?

Because, as I've argued extensively here, the bridge itself represents and can represent, if one follows the actual economic processes involved, nothing more than a recirculation of existing wealth (concrete, steel girders, re-bar, lumber, paint, blacktop etc.) from where it would have been used by the private sector to where the state decided to use it at its discretion. Whether the bridge was necessary and useful, or whether it was just a "public works" project used to "create jobs" to put a politician's name on isn't the point here. The bridge is redistributive, not generative.

The economic pie is the same size before the bridge was built as after. If the government, from tax receipts, builds an entire navel fleet, complete with destroyers, carriers, hospital ships, submarines, helicopters, and aircraft, the overall stock of wealth has not changed and the total economic pie is no larger than before the fleet was constructed (this should be too obvious to really demand endless debate and explication).

We are talking here only of facilitation and conditioning of the economic environment, not wealth creation in a salient sense.

[_Kevin Graham]

This argument is so lame that it is only relevant to those folks like droopy who simply do not understand what wealth is. It reminds me of a conversation I recently had prior to the elections, with an old High School friend on Facebook. He made the same argument saying his business was created by his family and only his family. On they are responsible for creating wealth. What is his family business? He delivers liquid propane for residential and commercial use.

I then began to explain to him that without government, he'd have no business at all. It was the U.S. Bureau of Mines that was responsible for discovering liquid propane back in 1910. It wasn't some privately funded corporate venture that his great grand pappy did on his own.

In another similar discussion, my sister in law tried to argue that her husband works for Merk, the pharmaceutical company that is responsible for innovative drugs that save lives every day. She provided one example of a drug I can't recall at the moment, but when I looked it up on wiki, it turned out to be a drug that was developed by a joint effort by both the US and Australian governments. But because the government isn't interested in selling its own innovation for profit, it sold the rights over to companies like Merk so they can then market the product and make a profit for themselves. And so people like her husband get to trot around the country touting this new drug as if it were something they discovered on their own!

Indeed, something like 70% of drug company revenues is put back into marketing, not research. So many times the government is responsible for medical breakthroughs, but it then hands it all over to private sector. So in these examples, who created the wealth, the government or these drug companies? Obviously the government.

Roads and bridges are the typical examples of government creating wealth, but what about GPS or the internet, neither of which would exist without government funding? The internet is responsible for boosting economic growth (creating wealth!) perhaps more than any other discovery since the telegraph. And if we consider education to be synonymous with wealth creation, then the government's investment in American education is another example of this. My best friend is a die-hard Republican and an anesthesiologist in Huntsville. But I know him well enough to know he relied heavily on government loans throughout his ten year education, as did his wife who received no scholarships when she was cruising through medical school. Neither of them would be doctors today without our taxes financing their education, and the amount they borrowed was in the range of a few hundred grand. So given the value they'd provided society over the past ten years, how can we say government isn't at least responsible for some of that wealth creation? The examples are endless really if you understand what wealth is. The AFA is also a tremendous wealth creator because it provided citizens with peace of mind. I know people who pay thousands of dollars in psychological/massage therapies to obtain that kind of peace of mind. It is one of the reason people in other countries are generally happier and less stressed out than Americans. It is why they tend to live longer lives too.

[_Analytics]

Using your definition, why doesn't the creation of a bridge represent a "productive economic activity that increases the overall stock of wealth above that which existed before such productive economic activity took place"?

Because, as I've argued extensively here, the bridge itself represents and can represent, if one follows the actual economic processes involved, nothing more than a recirculation of existing wealth (concrete, steel girders, re-bar, lumber, paint, blacktop etc.) from where it would have been used by the private sector to where the state decided to use it at its discretion.

Do you think that really addresses the question?

Let's put some numbers in here to make the point more clear. Let's say the market value of the concrete, steel girders, re-bar, workers time, etc., are precicely $1,000,000. If that is the market price, that is what the material is worth, right?

Let's say after the bridge is built, the government decides to sell the bridge at auction. At auction, the bridge sells for $10,000,000. That's plausible, isn't it?

By constructing the bridge, a series of inputs worth $1,000,000 was turned into a bridge worth $10,000,000. That is the creation of $9,000,000 of wealth.

When presented with this precise scenario, Thomas Sowell said, and I quote, “It is of course theoretically possible for government to create wealth.” Can you explain why you disagree with Dr. Sowell on the point?

[_Droopy]

This argument is so lame that it is only relevant to those folks like droopy who simply do not understand what wealth is. It reminds me of a conversation I recently had prior to the elections, with an old High School friend on Facebook. He made the same argument saying his business was created by his family and only his family. On they are responsible for creating wealth. What is his family business? He delivers liquid propane for residential and commercial use.

I then began to explain to him that without government, he'd have no business at all. It was the U.S. Bureau of Mines that was responsible for discovering liquid propane back in 1910. It wasn't some privately funded corporate venture that his great grand pappy did on his own.

Dr. Walter O. Snelling, who was an employee of the Beauru of Mines, identified propane as a volatile component of gasoline in 1910. Snelling then formed a partnership with other entrepreneurs, specifically Frank P. Peterson and Arthur and Chester Kerr, who created a commercially viable method of producing liquefied petroleum gas (the majority of which was propane) and inaugurated the American Gasol Co. Several years later (1913, to be exact), Snelling sold his patent for propane production to Frank Phillips of Phillips Petroleum.

Yes, Snelling was an employee of the Bureau of Mines, but leaping from this to the claim that the Bereau of Mines itself "discovered" propane is indicative of gross ignorance at the least and outright deceptiveness on the low end.

I see no indication of any justification for such a claim here:

http://www.propanecouncil.org/what-is-propane/history/

The rest of your paleo-commie ravings are not so much as worth responding to anymore. Even as a demagouge, Kevin, you're little more than a self-parody at this juncture.

Roads and bridges are the typical examples of government creating wealth, but what about GPS or the internet, neither of which would exist without government funding?

That dunce cap must be awfully heavy, Kevin. Without government funding? And where does all that government funding come from, Kevin, and who actually designs and creates the GPS and Internet cogs and widgets?

And if we consider education to be synonymous with wealth creation, then the government's investment in American education is another example of this.

Public education creates no wealth (indeed, as with all other government activities, it is a net consumer of wealth). The educated create wealth (as do many who are not formally educated - which, in America at least, has never been a barrier to wealth, and even great wealth), as they work, produce, save, invest, and make themselves valuable to employers, but the educational process itself, if by this you mean K-12 and publicly funded higher ed, is strictly consumptive of preexisting wealth, in and of itself.

[_Gadianton]

Did you notice when bcspace recently bolstered his credibility by telling us about his credentials? Specifically, he has an undergraduate minor in Economics.

yes.

And it's true that according to Droopy's religion (i.e. simplistic economic models with strong assumptions, including the precept that human beings are rational decision makers)

I disagree with this, it is my religion that creates simplistic economic models with the precept that human beings are rational. Droopy, on the other hand, believes that humans must first become Christians and right-wing intellectuals, and only then will they be rational, and only then will a free market work.

But that doesn't negate the fact that the government's activity is still creating wealth—it's just creating less wealth than would have been created in the free market.

Under this definition of wealth creation, clearly, the government can create wealth. Most right-wingers, including Droopy, have admitted that government creates wealth even by higher standards, because they believe some functions of society are prone to market failures. Sowell believes this. Droopy speaks in contradictions, however, because he does not know what a market failure is from micro-101; he refuses to look it up.

Droopy's argument is shape-shifting though to the point where he's restricting Government activity to the actual wealth transfer by fiat, and then defining wealth creation as something else, and then saying, "see, by definition, the government can't create wealth".

People who really believes that "the government can't create wealth" should be anarchists, not conservatives or libertarians.

[/quote]

This is correct, but Droopy insists that he rejects "anarcho-capitalism", so he's not consistent.

[_Gadianton]

By constructing the bridge, a series of inputs worth $1,000,000 was turned into a bridge worth $10,000,000. That is the creation of $9,000,000 of wealth.

I think we should dumb it down even further, now that I'm myself more clear that your requirements for wealth creation are so minimal that not even an anarchist could disagree.

Instead of a bridge, suppose a government agency, and suppose a government employee busy taking his third smoke break within the hour spots a bit of quartz-like rock on the ground. He informs his boss that he needs a spade. His boss runs the matter up the flagpole, taxes are raised, and the proceeds buy a shovel. The employee digs for a few minutes and unearths a huge diamond. Has the government created wealth? Of course it has.