Friday, 12 July 2013

Am I going mad or is this nonsense...

From 'The Commentator':

"Between government spending and income, however, there’s a feedback loop, the so-called ‘paradox of thrift’: slash public spending and you put people out of work, thus increasing the benefits bill and reducing income tax receipts. Rising unemployment reduces consumer demand and fewer public-sector contracts are available to private businesses – again stunting growth and reducing the tax take.

I've commented on the piece at The Commentator, as MrVeryAngry.

What do you think?

48 comments:

formertory said...

You're not mad; it's nonsense.

Mark Wadsworth said...

Beyond a certain narrowly defined categories of govt spending, it is of course nonsense.

There is no "fiscal multiplier" and for every £1 the govt gives to their mates in the private sector, only about half comes back as tax.

What this theory also overlooks is the simple fact that paying people in public or pseudo-private sector money to sit around wasting their time and ours is even worse than paying out the same amount of money as welfare and telling them to go and get a proper job.

paulc156 said...

The argument that 'only the private sector creates wealth' is a bit tarnished. It's a symbiotic relationship isn't it?
This is my analogy.Like the eukaryotic cell [the State] and the nucleus with it's dna [the private sector]. Separate the two and both are virtually useless.

Mark Wadsworth said...

PC, let's be a bit more nuanced about this.

"The state" provides the general framework (law and order, roads, keeping an eye on utility companies, public health in the narrow sense) and the private sector does the truly creative stuff.

So sure, it's symbiotic and you need both, but it's two quite different functions.

Like you need lungs and a heart, trying to breathe through your heart is fatal, as is expecting your lungs to pump blood round.

So expecting G4S to run the justice system is just as idiotic as expecting "the state" to actually run the productive economy.

And sure, there is a huge grey area like education or health, where "the state" has stepped in (for whatever reason), but you could see that as universal welfare spending/low cost mass insurance rather than an economic activity in itself.

Which is why more enlightened countries have taxpayer-funded vouchers.

Lola said...

MW. Out of curiosity which countries have taxpayer funded education vouchers?

Mark Wadsworth said...

L, Sweden and, to a very limited extent, the UK. Plus loads of others which I can't be bothered to look up, it not being my specialist topic.

paulc156 said...

The principle that the ideal division of labour is one where the private sector creates the wealth and the state just reThe principle that the ideal division of labour is one where the private sector creates the wealth and the state just regulates is and ideology preference.
Not even with regulations have the utility companies managed to stop shafting the general public, even whilst the gov begs and bribes the French state owned energy company to please build us some power stations urgently!
Also, the notion that private companies are the great innovators is overdone. It wasn't the private sector that discovered and invested massively in the development of modern computers and silicon chip technology, nor the airline industry, the world wide web and [back to my analogy] the discovery and deciphering of the human genome/dna. So even in the creative dept I don't think we should be too quick to disparage the state.gulates is and ideology preference. The principle that the ideal division of labour is one where the private sector creates the wealth and the state just regulates is and ideology preference.
Not even with regulations have the utility companies managed to stop shafting the general public, even whilst the gov begs and bribes the French state owned energy company to please build us some power stations urgently!
Also, the notion that private companies are the great innovators is overdone. It wasn't the private sector that discovered and invested massively in the development of modern computers and silicon chip technology, nor the airline industry, the world wide web and [back to my analogy] the discovery and deciphering of the human genome/dna. So even in the creative dept I don't think we should be too quick to disparage the state.
Not even with regulations have the utility companies managed to stop shafting the general public, even whilst the gov begs and bribes the French state owned energy company to please build us some power stations urgently!
Also, the notion that private companies are the great innovators is overdone. It wasn't the private sector that discovered and invested massively in the development of modern computers and silicon chip technology, nor the airline industry, the world wide web and [back to my analogy] the discovery and deciphering of the human genome/dna. So even in the creative dept I don't think we should be too quick to disparage the state.

paulc156 said...

Oops sorry about that I thought I had lost the first part of that post in the ether, so tapped it out again. Delete it if you want ...and this :(

The Thought Gang said...

Surely Sweden, the guardianistan utopia, cannot have an education system which features 'vouchers' or anything else that would suggest some degree of 'choice', 'accountability' or *shudder*, 'market'. After all, those who persistently demand we be more like Sweden would, in that case, be demanding more of that in the UK.. as oppose to doing the opposite.

Next you'll be telling me that they've got a healthcare system that is open to private sector innovation... yet manages to not be anything like the system in the USA.

Mark Wadsworth said...

PC, when and where did I disparage "the state"?

You list a few real life examples of where "the state" has done good stuff which the private sector probably would not have done, so what? I could list dozens of things "the state" should not have done.

And the energy companies don't just generate energy, they exploit a monopoly position and/or collect rental income, which is why there is a role for the state here.

Problem is, our benighted govt is colluding with the energy companies to push prices UP!!!

TTG, most European countries have taxpayer funded/compulsory private insurance type systems, where actual providers are not state-owner or state-run, but prices are largely set by the govt. and they seem to work fine.

But to be fair, until a few years ago, in terms of cost/results the NHS was really good. It wasn't the best but it was by far and away the cheapest. But now the cost has doubled and the results are not much better.

The US health system is shit because it is a govt protected cartel - a bit like our energy companies.

DBC Reed said...

@Lola
The bit which says" Rising unemployment reduces consumer demand" has to be right. It does n't matter how you improve demand as far as I can see: chuck the money out of helicopters; fix everybody up with a small unearned income variously called Citizens Income, Quantitative Easing for the People, Citizens Dividend, National Dividend etc : boost State Pensions; expand the public sector. Some of the things we used to do when we had a proper Mixed Economy. As the money would go to ordinary people ,then the most inflationary spending they would do would be on housing and LVT would put a stop to House Price Inflation.
Banks are not lending to small businesses (thanks to "business friendly" reforms ,we don't have any large corporations any more) because they know there's no effective demand to justify any loans. Paradox of thrift alright! The original statement of this paradox was Robertson's Fallacy of Saving in the 19th century.
This class war between private and public sectors is just ruling-class divide and rule.

Kj said...

Thought Gang:Next you'll be telling me that they've got a healthcare system that is open to private sector innovation... yet manages to not be anything like the system in the USA.

No they don't. There are some private contract business, but the Nordics and the UK is more or less the same, bar the NHS's thing for organising in "trusts". School vouchers is about as radical as it gets when it comes to sweden really.

paulc156 said...

Well you don't outright disparage the state Mark but rather damn it with faint praise. The state should do this 'important' but clunky stuff [maybe roads, some law enforcement, regulate the oligopolies, defend the realm etc] and the private sector does the clever innovative stuff. It sounds like a stereotypical libertarian view but not one I recognise as accurate or fair.

When you say "you list a few real life examples of where "the state" has done good stuff which the private sector probably would not have done, so what?"... those few things I listed are probably responsible for most of the growth in the post war economies of the western world that was real rather than financial fluff. Computerisation, containerisation, airlines, world wide web, etc etc. Strip half that lot out and the world econ' tanks. The reality is not the way the private sector makes out. They don't just need government enforced patent and copyright detection to the end of days [virtually]and a supply of good 'rental' opportunities ala rail and banking but they need the state to generate and discover and develop the technologies of tomorrow so they can parcel them up and hand them over to the private sector when the fruit is just ripe for picking. nice work if you can geddit.

Mark Wadsworth said...

PC, the good news is I get this shit from the Faux Libertarians and Homeys "Oh you believe in land value tax instead of income tax therefore you are a large state socialist who thinks the government should control everything" and I get the same shit from the socialists "Oh you think that the government is totally evil well yeah what about ..."

It's really boring.

There is no need to misquote me at myself, I have always made it quite clear that e.g. government protected monopolies like patents are a two-edged sword and suitable for high rates of tax etc.

And containers were invented by a private haulage guy who didn't even bother patenting it, he just wanted to make the world a better place.

So as long as I am being shot by both sides I am quietly confident that I am right and that you and the Faux Libs and Homeys are wrong :-)

Kj said...

If the government invents "everything of value", which it doesn't, handing it over to the private sector is a good thing. As long as it doesn't hand it over exclusively.

Lola said...

MW - "Getting shot at by both sides". Yep. Me too. Great isn't it?

DBCR - I can't quite follow you. If you are arguing for the Keynsian 'lack of aggregate demand/animal spirits that need lifting with money from the gummint' stuff, then I am agin you. Why? Because it is gummint and bureaucratic and central banking failure that gets us into the clarts in the first place.

DBC Reed said...

@Lola
The big breakthrough for the private sector came when Henry Ford
doubled wages to $5 a day in 1914, originally to stop workers drifting off , but having the effect of making it possible for his workers to buy his cars.
A hundred years later the whole capitalist narrative is about reducing wages and then going apeshit when nobody can buy anything.
This is explained better than I can in last Sunday's Observer when it s first leader was a right noble defence of the Unions as being vital to keep up demand.
Sorry libertarians ( capitalism's "useful idiots") your game's played out.
Keynesianism will work when accompanied by LVT to stop the cheap money going into landed property ( the theory Keynes plagiarised, that of Silvio Gesell, was criticised by Keynes only for its reliance on Henry George ie its vital component!).
I cannot see how paying, say, an increased State pension is much different from Fordism : it will discourage penshies from relying on unearned capital gains in houses; the money will be spent in the shops tout de suite.
Obviously pushing the money the way of bankers and financial services is not going to increase general demand at all.
I don't know whether you saw the Telly programme this week when big-name chefs were drafted in to help poor people (most of them in work)
buy nutritious food: one family with four children and two working parents had £1.60 to spare for food per person per day. The only thing in abundance was tears. Clearly a family like this is not going to generate enough effective demand beyond basic subsistence.
As the Observer notes you are not going to get demand to develop innovations when people are struggling to pay for groceries. At the moment all the private sector innovates is ways to reduce production costs (i.e ways to make cuts on wages) and a reign of management terror with managers threatening to sack people all the time.(See Observer).The revolution in management attitudes towards kick-arse methods is not only revolting on a personal level but also stops workers buying things long term because they don't know whether they'll still be in work.

Modern managers and employers are ultimately their own worst enemies by reducing effective demand.

Mark Wadsworth said...

Kj, agreed. If the UK govt invents something brilliant, ideally it would lease it to the private sector and get the taxpayer's money back.

DBC, as Lola says, it was Home-Owner-Ism and Big Government which got us into this mess.

It's all well and good arguing over how to patch up the symptoms, but basically, the idea is not to have Home-Owner-Ism or Big Government in the first place.

In which case, full on 100% LVT and CItizen's Income/vouchers hits the spot. Whether that is a way of getting OUT OF the mess or NOT GETTING INTO the mess in the first place does not matter.

Lola said...

DBCR - OK. But lots of inconsistencies in that. Private business has always sought to do more for less, but that does not include cutting wages. Quite the reverse. By investing in tools the productivity of labour is multiplied and consequently can be better paid. This is exactly what Ford did, and it is still going on. I speak from personal experience as my employees enjoy relatively high levels of capital investment and training and are paid more than they would otherwise be as they are more productive.

Your analysis is flawed, but as it's a nice sunny day I am not doing any more work on fisking your piece, but am going outside to enjoy the sunshine whilst being productive. Have a nice day.

adamcollyer said...

DBCR, you (and that charlatan Keynes) are assuming that growth is driven by consumer demand. Therefore recession is caused by lack of demand.

That has been comprehensively and repeatedly shown to be false over many decades now.

Growth is created by investment, self-evidently. What encourages investment? Not current demand, but the expectation of future demand. In other words, confidence.

Investment creates output, and output itself generates the demand to purchase it.

Of course the government can invest, and not only the private sector. But simply hosing money into the economy to create consumption demand in the hope that output will result is an utterly stupid idea.

Morgan Charles said...

"It wasn't the private sector that discovered and invested massively in the development of modern computers and silicon chip technology, nor the airline industry, the world wide web and the discovery and deciphering of the human genome/dna."

It wasn't? I always thought it was: computers - IBM, silicon chips - Intel, airlines - PanAm and other US airlines too numerous to mention, world wide web - OK fair enough, but Sir Tim spent much of his working career in private industry.
Practically any other invention that makes our life different to our ancestors has been invented without government help. Aircraft, railways, cars, telephones, electricity, radio, household appliances, refrigeration, agriculture, bicycles, the list is endless. My first example immediately reminded me of why the government is crap at doing this sort of thing: the R100 airship (privately designed and built, a success) versus the R101 (government designed and built, a disaster).

Kj said...

MW: if it's something that is naturally limited, yes. If it's research and information that anyone can use, no.

AC: I think DBC has explained this himself. H. Ford helped in increasing demand by making investments in better productivity and a better product, which enabled him to pay better wages, to further benefit his business by retaining good workers. Businesses that intentionally invest in productivity, lowering costs, including labour, has created growth that benefit workers in the long term.

Mark Wadsworth said...

AC, broadly agreed, but you keep harping on about "investment" as if it were something magical and to be done consciously.

It's not, "investment" is just "finding ways of doing more for less" as Lola explains and is in the natural order of things.

Even in a financial recession with weak demand, businesses still have every incentive to do "more for less" (or at least, "the same for less").

The counter-argument (with which I disagree) is that if "investment" = "automation" then that means unemployment, so the Luddites say that actually "investment" is A Bad Thing.
-------------------------
Kj, broadly agreed, but what is the point of your government paying for R&D and giving it away to the world in general?

A lot of the fantastic inventions for which governments were responsible happened during WW2 or Cold War (or Space Race), for example.

But doesn't Switzerland benefit from radar, Teflon, metal detectors, nuclear power, computers, internet etc, even though they didn't pay a pfennig towards it or even take part in any of those wars/races?

So to my mind, I'd only want the UK government to develop stuff which would give UK businesses a slight advantage (for which they can pay), not something which the bloody foreigners will promptly steal and do better and cheaper than us.

Kj said...

MW: Because it increases welfare, makes stuff cheaper etc. There is an advantage to having research done domestically without harvesting monopoly profits from it, you pay for having well-educated people, an environment for science and innovation and all that. Currently, when govt subsidises and "collaborates" with domestic businesses in R&D, what they do is give away the rights to the results to the private entity, that promptly starts production in China like everyone else, while harvesting monopoly profits from the patents. I fail to see that this is a bigger advantage to the domestic economy than making research available free of charge, and have the finished products be competed down in price quicker to everyone's benefit.

Mark Wadsworth said...

Kj, yes as usual you make good points, in fact probably better ones than I made.

But in your example, if the government charged private companies for using the patents, or collected the monopoly element of income back in tax, that would be even better.

And the government can then spend that money on more research etc.

It is claimed that the UK government spends far, far more on R&D than the whole private sector. I do not know if this is true.

paulc156 said...

MW. OK, I accept your point re governments extracting correct [high] taxes for for generous patents etc. does indicate you are against rentiers cleaning up and so on. My bad if I misread your views.

The containerization example I gave, I only had from a secondary source,[Chomsky] but looking in to that it would appear that the individual had a great idea about modularizing [sic] the containers which was invaluable but the driver as with so many things was the military. The Vietnam war turned the process into a viable mass production process and the ISO who with strong encouragement from the military standardized the containers, since even whilst modular they were different sizes across the globe.

DBC Reed said...

kj & AC
The problem with your argument about investment (requiring the magic dust of the Confidence Fairy no doubt)is best put by last week's Observer which I note nobody has read ,so I'll copy some out. Commenting on the thirty years' class war on the Unions and wages, by employers in league with right-wing governments of all hues,( and abetted by people calling themselves libertarians), the paper writes "We were told that that this would be the recipe for an investment boom. Instead ,companies are hoarding their profits and withholding their investment, while workers are having their wages squeezed. Britain ranks 159th in the international league table for investment as a share of GDP.....Britain is locked in a vicious circle of minimal investment and innovation because of uncertain demand, while ever more insecure workplaces are delivering falling real wages and even more uncertain demand".
I don't think you can argue with 159th.

paulc156 said...

@adamcollyer "Investment creates output, and output itself generates the demand to purchase it". sounds like Keynesianism to me?

Investment leads demand? Not clear that investment doesn't follow profits though. Plenty of interesting data support the latter view. Now that's definitely not Keynesian.

Mark Wadsworth said...

PC, OK, re containers, the TV programme I saw explained it slightly differently, but when e.g. the ISO decided to have an official standard size (because private parties could not agree) then that is the sort of "government" action of which I approve, it's the sort of thing which can only be done "collectively".

If of course private companies decide their own standard format (like cassette tapes) then that works just as well.

DBC Reed said...

@paul c
" Investment creates output and output creates demand" sounds like Say's Law to me. Problem is : no investment. And should you invest in highly mechanised production you'd have to increase wages to keep up demand , as Ford did.

Kj said...

Ford didn't, and couldn't, as a single employer, raise wage-levels to maintain demand for it's own cars, this is nonsensical.

Mark Wadsworth said...

Kj, damn, I've been meaning to say that for years.

DBC Reed said...

@kj & MW
No but he could start raising wages in an industry so that other producers would have to follow suit or be unable to recruit or retain staff. (Some parts of the United States were chronically short of labour so when,for instance, George was in California ,he spent a lot of time attacking the practice of hiring Chinese labour, which was indentured ie earning no current wages.Labour in the US typically drifted west to settle homesteads.)
As I thought was very clear ,especially if you had read the Observer leader ,I was talking about raising demand through unionisation across whole industries ,Observer: "We need stronger trade unions that can bargain for higher wages across whole industries. The phasing out of free collective bargaining has proved an economic and social mistake."
One employer cannot raise wages/demand over an entire industry: one union can. Which is why we need them. A full range of unions can raise demand nationally.
Billy Hayes of the GMB was on Newsnight a couple of evenings ago: members of his union receive 18% more in wages than other people in similar work. A general 18% increase would reverse much of the present decline ,as long as it does n't get frittered away in mere house price inflation, (which we all agree on, I think).

The Stigler said...

The "invest in the state to improve the economy" has me spitting feathers. Bastiat pointed out the nonsense of "creating jobs" centuries ago.

Take money from me to build Olympic stadia, that's money I'm not going to spend on opera tickets, a new dress for my wife, or a dinner at Le Manoir.

Now, arguably, there's probably no net difference. Instead of a builder getting some money to build a stadium, someone who builds opera sets gets money.

The problem isn't about jobs, it's about what they produce. Some crappy Olympic non-sport gets put on at ludicrous expense, instead of some Verdi and as a result, that makes me "poorer".

(I'm absolutely not defending subsidised opera here, I'm talking about the likes of Garsington and Glyndebourne that manage to put on productions for about £100/ticket).

paulc156 said...

"Take money from me to build Olympic stadia, that's money I'm not going to spend on opera tickets, a new dress for my wife, or a dinner at Le Manoir."

Ok, but what about spending the Olympic money on HS broadband or some other such efficiency enhancing measures that private capital won't do because the return is too little or simply too far down the road?

Furthermore, what if we redistribute money from wealthy opera goers [;)]with a low propensity to spend and give it to low earners in the form of lower taxes/benefits/citizen income who have a greater capacity to spend?

Lola said...

DBCR - It's no good quoting the lefty Observer at me, it, with its companion title The Gruniad are so unconscionably stuck in the past failure of the moral and economic bankruptcy that is socialism they are incapable of intellectually sound analysis.

In any event, helicoptering money never works. Think of what the exchange economy actually is - a system of barter lubricated by money - and you can see that production must come before supply. Ford knew this well. He was able to pay higher wages because his factories were more productive man for man than his competitors because he had organised them better and invested.

paulc156 said...

@DBC Reed
"Problem is : no investment. And should you invest in highly mechanised production you'd have to increase wages to keep up demand , as Ford did."

There is surely a great disparity of wealth between the average individual and the corporate bosses/1%ers whatever, but the idea that underconsumption [as a result of low wages in recent times] is the cause of our malaise is not clear at all in my view.
For starters, if we factor in benefits then total after tax compensation plus benefits allow for a pretty steady picture at least since the early 90's.
Since the mid-90s, the wage share [employee compensation plus employer's NIC] has risen and profit share fallen.During the recession, there has actually been a shift in incomes from profits to wages.
So even if it's true that capitalists exploit labour, they haven't been doing so in aggregate any more recently [last couple of decades] than they did in the past.
That living standards are lower is more a function in the fall of productivity with the recession.

Kj said...

DBC: look, you are a demand stimulus guy. Fine. But all this wages has to go up stuff, and I assume you mean all wages has to go up, is basically just demand stimulus, right? If you believe in DS, fair enough, but the case for universal DS through general injections, is far more convincing than this wager-upper thing (not to me, but for the sake of argument). Most costs are wage-costs, and an increasing average wage means increasing average costs, and is a zero-sum game. If done unilaterally, it damages the domestic economy. Wages are just variations around an average, that tends toward an equillibrium. Some get more, some get less, depending on the demand for their labour. Increased real wages are ultimately the result of productivity increases.
You can't just view the economy as a result of the measurement value, money. Behind are real resources and labour that is allocated according to a measurement value. The idea that we can just increase the measurement value, or the measurement value as awarded to one factor (in your case, labour) to instill "confidence" in the real economy is alchemy to me, and far worse, it's pretty reckless when we know how little we know, and how little we can know (as per Hayek).

DBC Reed said...

@KJ Right I do believe in demand stimulus (so what's the better/ opposite option demand suppression?Well that's what we've got.) As I've said over and over, Keynes, in plagiarising Silvio Gesell's monetary stimulus theory (which does work , its been revived round the Chiemsee) disparaged his work on land values for being inspired by Henry George.
All I am proposing is Keynes plus the land value back-up that Keynes discarded.
@Stigler .I agree with Paul C.Also you appear to insist that the public sector cannot spend money on bringing pleasure to millions with the Olympics if it means curtailing your Veblen conspicuous consumption, although you are quite happy to drive down the publicly provided roads to the snob restaurant and enjoy expensive meals, safe in the knowledge that public health inspectors can ensure it's cleanliness. There is nothing worse than well-off anarchists, in my view.
@ paul c I don't know where you are getting your figures from(you don't cite sources).But I don't think the Labour Government would have intro'd the minimum wage in 1999 and the working tax credit to supplement low wages in 2003 , if there had n't been urgent need.
@Lola Take it from a lefty: the Observer/Guardian aint lefty. The Guardian told readers to vote Liberal last election! Read the article, instead of talking from prejudice: its surprisingly coherent.

Lola said...

DBCR - " its surprisingly coherent.. Is it? Crikey! I bet it's coherent in a lefty way, which makes it self evidently incoherent. Do you want to email a copy to MW, or paste a link?

DBC Reed said...

@Lola Being a very old dog,I am not up to the trick of providing a link.
But the editorial can be Googled as The Observer 7.7.13 Why we need unions but not as Labour's bankers

Kj said...

Wow, paul and DBC, making judgements about what sort of consumption is acceptable and what's just Veblen consumption eh? True soviet colours coming out now.

Mark Wadsworth said...

Paul, you went a bit too far with that comment @ The Stigler. Do you realise that "musicals" have done far more for London's tourist industry over the decades than the Olympics, at zero cost to the public purse?

Musicals are not my thing, and neither is opera but the tickets seem to cost much the same. So would you shut down all the musicals in London as well and thereby decimate the tourist industry?

However, your comment @ DBC is spot on. There's nothing like dragging facts into a debate, is there?

paulc156 said...

@DBC Reed. I too have difficulty on here with linkys. So you can see info on wage and profit share for the last half century here:

http://uneconomical.wordpress.com/2012/04/23/uk-gdp-by-income/

Specifically regarding changes since the recession the following ONS infographic is useful in comparing the top 20% to the bottom 20% both with and without benefits and taxes:

http://www.ons.gov.uk/ons/rel/household-income/the-effects-of-taxes-and-benefits-on-household-income/2011-2012/info-taxes-and-benefits-on-household-income.html

Re national minimum wages. It is true that these are deemed necessary as a result of the denuding of unions. With strong unions one would expect local bargaining to take better care of wages and as a bonus to reduce the need for much regulation. A win win.
I just don't buy into the notion that increasing wage share solves the problems of recurring economic crisis, although it will likely benefit the recipients of the higher wages. For one thing wages have not really fallen very much between the Major and Gordon Brown govs when looked at with increased benefits [tax credits/housing benefits etc]and even with increased wage share we have seen severe recessions in the 70's and 80's, so we can't presume tinkering with wages will solve this.

paulc156 said...

@Kj. I was merely responding to Stigler's assertion that: "it's about what they produce. Some crappy Olympic non-sport gets put on at ludicrous expense, instead of some Verdi and as a result, that makes me "poorer""

'If' the state is to spend money on anything other than law enforcement, health and welfare or defence it might be argued that spending on productivity enhancing infrastructure [for example] would have longer lasting net benefits for many more people than a bit of conspicuous consumption [;)] by a handful of privileged elites. If however the merits of Opera are truly enriching to a 'wide' audience then perhaps subsidy to the Opera is in order.

@MW.The Opera may indeed be a good tourist draw and since London is clearly chock full of over-subsidised rentiers who provide a ready audience it may indeed be justifiable on the grounds of net benefits rendered to London's tourist trade. My own preference would be for 'spending' on measures that benefit a wider 'audience', in both the geographical and class sense. That said, as commented above, if Opera is really so cool, let's make it more accessible. [though I do wonder if in doing so one simultaneously makes it less appealing to the original audiences?]

The Stigler said...

paulc,

"Ok, but what about spending the Olympic money on HS broadband or some other such efficiency enhancing measures that private capital won't do because the return is too little or simply too far down the road?"

I don't disagree with the principle of spending on public goods. But HS broadband is a very good example of something that people cry out for as a public good that really isn't.

I have no problem with dial-up, or even slow-speed broadband (500mb) being classed as a public good, but most of this isn't. It's people wanting speeds more like 5mbps or fibre speeds, so they can stream movies, which is really just entertainment. But they want someone else to pay for it because of their lifestyle choices.

Kj said...

PaulC: oh, sorry, I thought you said that it's better to take money from people like TS, that would just spend it on frivolous consumption like opera and dining, and spend it on something for the masses instead. Granted, you didn't go as far as DBC as to imply that any such consumption would be something that would not be tolerated after the proletariat is in charge though.

The Stigler said...

paulc,

The Opera may indeed be a good tourist draw and since London is clearly chock full of over-subsidised rentiers who provide a ready audience it may indeed be justifiable on the grounds of net benefits rendered to London's tourist trade.

It's doubtful. If you asked most opera fans where they would go for opera if travelling abroad, it would be either La Scala in Milan or the Verona Festival. And the Verona Festival demonstrably shows the effect of opera to them as hotel prices double.

That's not to say that someone coming to London might not consider it as part of their overall visit that they can go to the opera while they are here, but it's doubful that it's a deal breaker.

That said, as commented above, if Opera is really so cool, let's make it more accessible. [though I do wonder if in doing so one simultaneously makes it less appealing to the original audiences?]

That's the last thing you want to do.

The survival of musicals and pop music is that showmen run them. The people running opera and ballet have no idea about commerce, about maximising revenue. You pick up a programme for an opera (that itself costs almost nothing), there's nothing in there about the fact that the opera company has also made a CD or DVD recording of the opera you're watching.