I think that if your political predictions batting average is anywhere as bad  as your console war predictions batting average then Obama is gonna be the next POTUS.

I would like to thanks everyone as it is an interesting thread from an outsider's perspective.

If it was up to me I would vote for Rubang to be president, a naked US president would be a hoot.

Your opinion on the New Deal is off. To say that public works projects (CWA, WPA, and et al) ended the Depression is specious.  The problem with government providing the jobs is that its workers are woefully inefficient, it cannot determine the worth of a worker and it takes resources away from the private sector. If we can solve our economic woes by hiring people to complete government projects, why are we not doing it now? I know why...it does not work. Also, the government created artificially high wages through NIRA codes and increased the cost of employment through the Social Security Tax and other failed policies. This prevented firms from hiring more workers because they could not afford them. If firms cannot hire workers, who is going to provide employment...the government?

Government intervention also hampered the US' agricultural recovery. As unemployment was rising and people were struggling to provide the basic necessities, the government ordered the destruction of surplus crops and caused food prices to remain high. This was done to ensure farmers could make a living, but the artificially high prices caused millions of Americans to starve because food prices were too high. I could go on about how the New Deal was by and large a disaster, but I have made my point.

I just provided the economic definition of how the government providing jobs is more efficient than the private market in certain cases, which is referred to as market failure.  There's no need for me to argue well-understood economic principles here.

The reason the government undertook projects in the first place was because the private sector was not able to hire workers.  Its silly to say that the New Deal prevented private firms from hiring when the only reason the New Deal came into existence was to hire workers that the private market was unable to.

You provided a few instances where government intervention in the economy may be positive, but government intervention during the Depression was far from positive. Since you seemed inclined to repeat "market failure” and how the government was a positive influence during the Depression, as I did in an earlier post, shall highlight government failure and how it is a more serious threat to the economy than market failure and how government intervention prolonged the Depression.

You say the government undertook projects because private firms could not hire workers. I would agree with that. I think the pertinent question is why the private firms could not hire workers...and the answer is government intervention. Had the government not interfered in the first place, private firms would have been able to hire workers. One such government failure, as I earlier noted, was the Smoot-Hawley Tariff. The massive loss in international trade had devastating effects on the American economy. In order to pay for these seemingly miraculous government jobs that saved America, the government had to raise taxes. This leads to another such instance of government failure, the Revenue Act of 1932, which was the largest peacetime tax increase in American history. Not only did Hoover raise taxes exponentially, but Roosevelt continued to raise taxes in order to pay for those "jobs." Since you are knowledgeable about "well-understood economic principles," you should know that such a meteoric tax increase would kill consumption and capital investment. I digress, tax increases may be desirable during inflationary boom periods, but the state of the economy in 1932 was the antithesis of an inflationary boom period. I could continue to expound upon why government failure prolonged the Depression, but I have made my point...again.

Sorry to interrupt your deep discussion on economic policies... I just wanted to properly introduce everyone to senator Obama's new running mate, Joe Biden!


http://www.youtube.com/watch?v=NmRXH7RkCZQ


Thank you for watching, and now back to your regularly scheduled economic debate.

The Smoot-Hawley Tariff wasnt enacted until after the Great Depression had already begun.  The Great Depression was a global problem, not just an American one caused by American legislation.  I would definately blame bad investments over things like government involvement.  In the 1920s a lot people thought that everyone would soon own personal airplanes (just an example), and when people invested so poorly in dead-end companies that could never stay deliver the economy collapsed.  This was similar, although to a much greater degree, to the 1990's internet economy when people were investing in companies that had no hope of staying afloat.

More importantly to our conversation, government involvement in international trade (atleast not this example) is not as efficient as the market according to economic principles.  An example of government involvement in foriegn trade working is the South Korea automobile industry (huge positive externality), where Korean companies were initially too weak to compete on the global market but thanks to government involvement (mainly subsidies) South Korea was able to nurture its automobile industry until it could support itself.  Essentially, no government involvement no automobile industry for South Korea.

As stated earlier, the government is more efficient than the market at providing public goods, externalities, and information.

S-H was indeed enacted after the Depression had begun. However, passage of S-H was much discussed before the stock market crash of October. It cannot be measured how much of an impact this prospective legislation had on the events before its passage, but that such a large number of economists lobbied against its passage could not have helped the economy. Even though the Depression was global, the global aspect required a catalyst and S-H was the catalyst. The resultant collapse in international trade due to S-H had a negative impact in other countries and prolonged the economic recovery of the US.

Instead of bad investments, although they are partly the result of this, I would blame the monetary policies of the Federal Reserve. The inflationary expansion of the 1920s was the cause of the market crash in 1929. Reserve Chairman Harrison had to tighten the monetary policy to cure the ills of the inflationary boom and his decision to do this was a cause of the market crash.; but instead of letting the market correct itself, the government intervened and exacerbated the problem as I have previously pointed out.

I would agree that in certain instances the government is more efficient at providing goods, externalities and etc. However, the private markets can actually be more efficient than the government in cetain instances. As I am sure you are aware , the example of the lighthouse displays how the private market can be more efficient than the government at providing public goods.

I think we both agree that tariffs are bad and government involvement when not necessary is bad.

I dont understand this quote, however.  Roads, national security, and lighthouses are classic examples of market failure.  The lighthouse is a public good and there is no way for the lighthouse to decide who can consume their product and who can not.  If a ship doesnt pay the lighthouse fee, there is nothing the lighthouse can do to take their services away from them.  If you dont have to pay a fee to recieve the service, then there is little incentive to pay. 

To correct this, the government or some other governing entity has to tax vessels that use the lighthouse, usually as a fee whenever ships dock in the harbor than the lighthouse serves.

That is what most people believe. That a lighthouse is non-rivalrous and is non-exlcudible because there is no possible way to charge every ship; however, private lighthouses were successful in Great Britain and other states such as France and Uruguay. Quite often a private entity would construct a lighthouse and charge a nearby port to make money. Ports would be inclined to pay user fees for the lighthouse because a lighthouse meant more business. If the port did not have a lighthouse, then ships would not come in to dock. If they paid someone for use of their lighthouse, ships would come in to port and that would mean increased business for the port. There were also lighthouses ran by religious charitable organizations, but they were often the exception to the rule. I agree the government has to provide some services, but not as many as people believe.

That private entity has to have the ability to force customers to pay. If a harbor operates a lighthouse or pays a private lighthouse by charging ships that land there it would work, but it will never be as efficient as a publicly funded lighthouse because there are ships that can still use the lighthouse and do not pay a fee. Maybe they dock eleswhere, just passing through, etc.

In economics its referred to as a free rider problem.