Tuesday, August 03, 2010

The Seen vs. The Unseen

"The heart of the case against the Detroit bailout is that it saps the life-blood of entrepreneurial capitalism. The bailout reinforces the debilitating precedent of protecting firms deemed ‘too big to fail.’ Capital and other resources are thus kept glued by politics to familiar lines of production, thus impeding entrepreneurial initiative that would have otherwise redeployed these resources into newer, more-dynamic, and more productive industries.

The ‘success’ of the bailout is all too easy to engineer and to see. The cost of the bailout – the industries, the jobs, and the outputs that are never created – is impossible to see, but nevertheless real."

~Don Boudreaux at Cafe Hayek responding to Paul Ingrassia's defense of the auto bailout in yesterday's WSJ ("Two Cheers for the Detroit Bailout").

See also "What Is Seen and What Is Not Seen" by Bastiat who wrote in 1848: "There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil."

15 Comments:

At 8/03/2010 10:23 AM, Blogger Walt G. said...

We cannot argue against Boudreaux’s hypothetical hands-off scenario because we cannot prove it's wrong any more than he can prove it’s right, but intuitively we know it’s true. That is, if we assume rationality and a free market, which might be a stretch after the ADA abuse and regulatory discussion lately.

I’ll take the one million jobs and the $300 billion that was quantified in the CAR research report and the GAO study that the economy did not lose from the input of the federal loans anyway because, as John Maynard Keynes said, "In the long run, we are all dead."

 
At 8/03/2010 10:31 AM, Blogger Benjamin said...

Oh, blah, blah, blah. Where are these believers in free enterprise when every year the socialist, enfeebled, mollycoddled panty-waste agri-rural sector sucks down subsidies and favorable regs, and uses free help from 7,000 USDA extension agents?
Rural America is a socialist empire, and has been more and more so since the 1930s. Did ever a USDA program die?
How about $8 billion a year so that rural telephone users can have service? That's tacked onto urban user phone bills, btw.
Why even have a USDA at this point?
There is no USDM (Manufacturing).

 
At 8/03/2010 11:17 AM, Blogger Jason said...

Walt, I had many reservations with how the auto bailout happened. However, since my livelihood relied on the bailout, I would be a raging hypocrite if I said I didn't want it to happen, at least in some form. Boudreaux is not wrong, but it doesn't mean we should take a total hands off approach. We must hold our lawmakers accountable so they only draft sensible and robust legislation, and only when it's necessary. Lately we've been getting the ludicrous, faulty and un-necessary kind.

And Benjamin, I don't care what the USDA costs. Because with it I feel better about eating a Kansas city stip than without it, believe me. And you can thank Upton Sinclair for it. I sure do and I am no fan of government agencies.

Let's vent about some completely useless agencies like he department of education or house and urban development!

 
At 8/03/2010 11:59 AM, Blogger Paul said...

Benji,

"Oh, blah, blah, blah. Where are these believers in free enterprise when every year the socialist, enfeebled..one note Benji rant, etc..."

Where are they? Most of the time they're the same people protesting both your boyfriend's Big Ag and Big Labor whoring around. You could have said both the auto bailout and ag subsidies are an abomination. But your boyfriend bailed out Walt and his buddies, so you do your usual thread hijack.

 
At 8/03/2010 12:11 PM, Blogger Walt G. said...

Jason, I benefited, too. And as a fiscal conservative, I was initially against it in my heart. Other than the "unseen," though, I could not find quantification anywhere that says it was not a good investment. I asked a lot of people who would have been more than happy to gloat and supply a positive no-action alternative, but I never received anything that was not written by someone pandering to the populace for their living. Supporting the UAW/GM was not going to sell many newspapers outside of Michigan: Bias comes in all forms.

Ford really made out well. All indications were that Ford would not have survived GM’s liquidation because of the intertwined suppliers (and less so, Chrysler), and look at Ford now. You also know it's a serious situation when Toyota lobbies Congress for GM

 
At 8/03/2010 12:30 PM, Blogger Benjamin said...

« Back to Article


Wireless outdates $8B phone subsidy
By Cecilia Kang Washington Post
Published: 01:00 a.m., Sunday, July 25, 2010
Comments (0) Share
Larger | Smaller
Printable Version
Email This
Georgia (default)
Verdana
Times New Roman
Arial

Font
Page 1 of 1
WASHINGTON -- Americans are turning away from home phone lines and toward mobile, but a federal program continues to pour $8 billion a year into phone service for rural homes and businesses. Last year in Chelan, Wash., for instance, the fund paid an average of $17,763 each for 17 residents to get phone lines.

But as the nation looks to wireless and fiber.

 
At 8/03/2010 1:25 PM, Blogger Paul said...

Benji,

"Last year in Chelan, Wash., for instance, the fund paid an average of $17,763 each for 17 residents to get phone lines."

Imagine what the cost will be when your boyfriend finishes his rural broadband initiative.

 
At 8/03/2010 1:52 PM, Blogger Benjamin said...

Paul From Texas-

It is TX farmers most reliant on federal lard. Odd, isn't it? They probably talk about being self-reliant, rugged individualism--and those fat subsidies.
A couple thousand moons ago, when I worked in the S&L industry (and played a minute role in getting the industry deregged, and that led to a $200 billion bailout),
we had a saying: "I believe in free enterprise and Regulation Q."

I just hope TX does secede from the Union, along with Montana, Kentucky and Alaska, and most other lard-bucket states. We would actually have a balanced federal budget.

 
At 8/03/2010 9:04 PM, Blogger Paul said...

"It is TX farmers most reliant on federal lard. Odd, isn't it? They probably talk about being self-reliant, rugged individualism--and those fat subsidies."

According to the statistics, 90% of them don't get subsidies. On the other hand, I bet the majority of Obama voters have their hand in my pocket.

 
At 8/04/2010 5:52 AM, Blogger geoih said...

Quote from Walt: "I’ll take the one million jobs and the $300 billion ..."

So is that where they got the money? From you? That's great! Here I thought all that bailout money was confiscated from all of us tax payers and given to a politically connected special interest.

 
At 8/04/2010 5:58 PM, Blogger Ron H. said...

"So is that where they got the money? From you? That's great! Here I thought all that bailout money was confiscated from all of us tax payers and given to a politically connected special interest."

No, No, geoih! According to Walt G. (and of course Obama) that was an investment. Even though GM had been failing for years, and no private money would touch it, all us taxpayers suddenly decided that it was a great investment

A scary CAR Research Memorandum supported the idea that we had better do it, or ELSE!, claiming that under the most likely scenarios as many as 1 million jobs and as much as $300billion could be saved if we were only willing to nationalize GM. Of course some baseless and arbitrary assumptions had to be made, and other probabilities ignored. but it sounded good enough, so we jumped right in, not for a moment forgetting our debt to our buddies in the UAW, who had spent so much and worked so hard to get us elected.

Walt G. calls this report "quantified", as if the numbers had some real meaning, but it's really just the "what if" output of a computer model. Sort of like climate change guessing. It's pretty hard to quantify 'what might have been'.

One of the more glaring omissions is the role that demand might play. The Memorandum appears to assume that if the supply of autos made in this country suddenly dropped to 50%, then demand would drop that same amount. There's no consideration of the idea that if one or more of the big 3 Detroit automakers failed, the remaining manufacturers in the US and others abroad would likely see their business booming, and they might quickly absorb some of the resources that had been misused by GM.

 
At 8/05/2010 1:29 PM, Blogger Walt G. said...

This comment has been removed by the author.

 
At 8/05/2010 1:35 PM, Blogger Walt G. said...

Ron H.

Let's see your analysis if you have a better one. Ford thought GM's liquidation would lead to their failure and so did Toyota. If they are so great at running their business, how could they be so wrong about that?

 
At 8/05/2010 2:43 PM, Blogger VangelV said...

Oh, blah, blah, blah. Where are these believers in free enterprise when every year the socialist, enfeebled, mollycoddled panty-waste agri-rural sector sucks down subsidies and favorable regs, and uses free help from 7,000 USDA extension agents?

Pay attention. Don Boudreaux has always been there arguing against government interference.

 
At 8/05/2010 2:46 PM, Blogger VangelV said...

According to the statistics, 90% of them don't get subsidies. On the other hand, I bet the majority of Obama voters have their hand in my pocket.

That is right. The corporate state does not give much in the way of subsidies to the little people. Most of them go to the established players who buy the regulators.

 

Post a Comment

Links to this post:

Create a Link

<< Home