The kosher bridge

by Russ Roberts on March 31, 2009

in Stimulus

It's kosher because it's not pork, at least that what the Mayor thinks. CNN reports:

Should a bridge that would connect two campuses at Microsoft's
headquarters be funded with $11 million from the federal stimulus
package?

No.

Kind of a no-brainer, really.

Critics of using stimulus money for the bridge say it would give the
software giant a break on a pet project. They also say it serves as a
warning sign of how some stimulus money is not being used to finance
new projects but is being diverted to public works already under way.

Supporters argue the bridge is an ideal public-private partnership
that will benefit an entire community while fulfilling the stimulus
package's goal of getting people back to work.

"It's going
create just under 400 jobs for 18 months constructing the bridge," says
Redmond Mayor John Marchione. "It's also connecting our technical
sector with our retail and commercial sectors so people can cross the
freeway to shop and help traffic flow."

Liar liar pants on fire. It will not create just under 400 jobs. It
will employ 400 people for 18 months. Will it add any new employment? Any at all?

Read the rest of it if you have the stomach. The Mayor, strangely enough, thinks "everyone's getting a fair deal."

This is a bad time for words. They mean nothing these days.

Be Sociable, Share!

Comments

comments

51 comments    Share Share    Print    Email

{ 50 comments }

MnM March 31, 2009 at 11:38 am

I wonder if Microsoft contributed to the mayor's campaign fund?

Daniel Kuehn March 31, 2009 at 11:43 am

Arguments for projects like this distort the whole point of public infrastructure funding, and give infrastructure funding a bad name.

If Microsoft is going to reap the benefits of this project, it can build the bridge. Now, the article says that only 42% of the bridge traffic will be Microsoft traffic. That is quite a bit of non-Microsoft traffic – but it's a bridge! Set up a toll for the other 58%. It would be easy to capture that revenue for Microsoft.

Don – this is a perfect example of a specific policy that would sharply divide various proponents of limited government intervention in the economy :)

MnM March 31, 2009 at 12:13 pm

Set up a toll for the other 58%. It would be easy to capture that revenue for Microsoft.

Provided that MS built the bridge that toll would also be a great way to recapture the bridge's expense. (or is that what you meant? I may be misunderstanding you)

Oh, and Russ posted this one. ;o)

9 March 31, 2009 at 12:17 pm
Daniel Kuehn March 31, 2009 at 1:08 pm

MnM –
Right – revenue to Microsoft.

Some infrastructure projects like the interstate highway system, while they could be funded privately with tolls, would have such astronomical up-front costs that the market still might not be able to do it, and it might possibly justify public funding.

This is clearly, clearly not that kind of a project. I'm sure there's lost of other prime candidates for stimulus money in this town that the mayor can advocate for. The only reason why I can think he's acting as a lobbyist for Microsoft is the reason that you provided – campaign contributions.

Gamut March 31, 2009 at 1:10 pm

9, that's almost as good as that comment someone posted a few weeks back about the great Obama statue bubble solution (whoever it was, I'm sorry I can't remember who you are, but that was magical).

Joe Pascarell March 31, 2009 at 1:11 pm

Literally , a bridge to nowhere

John Papola March 31, 2009 at 2:01 pm

Given the private construction of the railroads (among many other such endeavors), I find any argument about the insurmountability of large infrastructure projects by private firms as built on sand.

Large, expensive projects are indeed very hard to fund, as they should be. People should be exceptionally prudent with these kinds of projects and weigh cost/benefit very very carefully.

After all, the last thing you want is… I don't know… millions of people making long term investments without the true costs informing their choices. Of course, government thinks that this is the SOLUTION! Oh sure, malinvestment caused the problem… but more of it will be a solution!

If there is one theme throughout this depression, it's that third party funding doesn't work. Whether you're an investment banker risking an over-leveraged portfolio, or a home-borrower getting a 100% mortage, or a healthcare provider charging medicare, or a city building and maintaining infrastructure… it just doesn't work.

vikingvista March 31, 2009 at 2:11 pm

"This is a bad time for words. They mean nothing these days."

Didn't "stimulus" and "expense" used to have different meanings?

How about "create" and "transfer"?
"Spending" and "growth"?
"Private" and "public"?
"Contribution" and "confiscation"?
"Ask" and "tell"?
"Rights" and "privileges"?
"Limited" and "unlimited"?
"Capitalism" and "croneyism"?
"Republicanism" and "fascism"?
"Me" and "we"?
"Autonomy" and "autocracy"?
"Freedom" and "slavery"?
"Hope" and "fear"?

Crusader March 31, 2009 at 2:13 pm

What's good for MSFT is good for the economy. Of course we should do it.

vikingvista March 31, 2009 at 2:25 pm

"third party funding doesn't work"

Information limitations always create inefficiencies, but if ever a third party financing scheme could work on its own, mandatory participation or government supports would direct behavior so as to guarantee failure.

Daniel Kuehn March 31, 2009 at 2:41 pm

RE: "Given the private construction of the railroads (among many other such endeavors), I find any argument about the insurmountability of large infrastructure projects by private firms as built on sand."

Ah yes. Clearly the government had nothing to do with getting the railroads built. I'm not saying the private sector should be shut out – just that there may be a role for government.

RE: "People should be exceptionally prudent with these kinds of projects and weigh cost/benefit very very carefully. " AND "After all, the last thing you want is… I don't know… millions of people making long term investments without the true costs informing their choices."

I absolutely agree.

And it's a good point on third party funders too – it's one reason why I am leary of and still on the fence about the bank plan.

Stephen March 31, 2009 at 3:03 pm

Daniel,

Your sarcasm: "Clearly the government had nothing to do with getting the railroads built."

You miss the unseen consequences of government involvement in the railroad industry.

Yes, the railroads were built.

But at what COST?

Undoubtedly, at a greater net cost to all consumers and producers than would have resulted from an entirely private endeavor.

But a politician can point to the railroad, he can hammer in the golden spike.

But the wasteful dollars and man-hours because of government involvement go down the drain, right off the pages of history.

RL March 31, 2009 at 3:14 pm

We can double the jobs! Employment can last 36 months if, after completing the bridge, the employees simply disassemble it.

Perry Eidelbus March 31, 2009 at 3:21 pm

Daniel, although brevity is not my usual style:

You need check out what Burt Folsom had written and lectured about the success of publicly funded railroads versus privately built ones. Another excellent example is Edward Collins' failed steamship line (a predecessor of today's Big Three in that Congress kept pumping money into it) and Cornelius Vanderbilt's successful competing line.

But perhaps you're pointing to Amtrak (today or at any time, it doesn't matter) as a model of success when it comes to federal subsidies…

Don Boudreaux March 31, 2009 at 3:21 pm

Joe Pascarell describes this as "literally a bridge to nowhere" — I agree, at least at first glance.

But looking more closely reveals that it is a bridge to serfdom. The state is forcing ordinary people, against their will, to supply benefits to the rich and powerful.

Those with the power to order serfs about, or who are on the receiving end of the goodies that the serfs are obliged to supply, of course find countless justifications for the practice of forcing serfs to "serve." At the end of the day, though, it's brutal and unjustified (and, incidentally, also economically harmful) coercion by the powerful of those with less power.

Some people today describe such arrangements as "Progressive." Ain't that rich?!

Crusader March 31, 2009 at 3:30 pm

Don – how do you counter the argument that if it weren't for the state, we wouldn't have 50K miles of interstate highways?

Christopher Renner March 31, 2009 at 3:30 pm

Daniel Kuehn: Some infrastructure projects like the interstate highway system, while they could be funded privately with tolls, would have such astronomical up-front costs that the market still might not be able to do it, and it might possibly justify public funding.

Roadgeek that I am, I can't think of a single infrastructure project which could not be financed with toll revenue bonds.

Just about every bridge in New York or across the Delaware River, every pre-Interstate tollway system(this includes the PA/OH/IN/NJ turnpikes, among others), and almost every 19th century railroad (the UP-CP from Omaha to Sacramento did receive cash subsidies and land grants) were financed in this way.

The Interstate system, though it obviously was useful infrastructure, was sold to the public as quasi-defense spending in order to justify the expense – and financed with fuel taxes and the like, not income tax revenues.

What happens, instead of the market being unable to finance a project due to astronomical up-front costs, it is simply unwilling to build projects which will be minimally used. In other words, bridges to nowhere – and this is where, and why, the politicians step in.

Oil Shock March 31, 2009 at 3:40 pm

Crusader,
Here is a comment from mises blog that I found interesting:

#

People who talk about how the government is this beneficial, benevolent master have no idea what really goes on.

For the moment, let's disregard the mafia-style wars that governments start (both internecine and imperialist — just go read Smedley Butler and you'll see how long this has been going on). And let's disregard the pernicious, veiled tax known as "inflation," engendered by our central bank and its fraudulent currency.

Even when we focus strictly on the various forms of domestic economic regulation at the local level, there is a VAST web of control by the State that 99.9% of people never see or even think about.

The roads are a perfect example. Governments (from local to federal) control the placement and location of all of the roads. This means that the State controls where EVERYONE lives and works.

The State controls the location of all buildings, both business and residential. Zoning is only one small part of that control mechanism. There are things called "comprehensive development plans," mandated at the state level, and implemented at the county and local level.

These plans, obviously, are affected to a large extent by the placement and construction of various kinds of government roads. Just ask a "Land Use attorney" about what he does all day and you'll get an inkling of how much control governments have over our lives.

The ordinary person sees the strip mall, the freeway and the quickie-mart going up on the corner, and doesn't give it another thought. People never think about all the other possible economic uses that this land could have been used for — the businesses that will never be started because they will never be built there.

Consider the money that we all spend on cars to travel around these government-designed cities. Think of all the things that are NOT bought because this money is spent on cars and tires and gas and repairs and insurance, etc. The oil, car and tire industries bought off local governments a long time ago to destroy light rail service and build ever-larger roads, and ever-expanding cities. We are now 100% dependent on cars, and therefore dependent on the oil, car and tire industries as well.

Government has such a pervasive control over our physical space that most people don't even see it. Most people alive today grew up in a time when all there was were subdivisions, and you went to your suburban schools, drove your cars on your artery 8-lane highways to get to your megaplax grocery store and thought that this way of life is perfectly normal.

It's not normal. It's by design. There is a whole other way of living — ways of living that people would build voluntarily, if they could.

How is it remotely possible to claim that government creates wealth through its various forms of control, subsidies and land use regulation? To do so, you would have to account for what is UNSEEN — the things that never exist because government decreed that they wouldn't exist.

Here is the link to the article

Christopher Renner March 31, 2009 at 3:47 pm

Crusader – a better question would be, "Is the US better off with 50K miles of interstates, built where various government officials decide they should be, and financed by drivers as a whole – or are we better off with a possibly lesser amount of toll roads, built where demand exists for them, and paid for by their users?"

Don Boudreaux March 31, 2009 at 3:49 pm

Crusader,

You ask: "how do you counter the argument that if it weren't for the state, we wouldn't have 50K miles of interstate highways?"

Counterfactuals are inherently speculative. But this one is actually rather easy.

Given that people clearly value the ability to drive on limited-access highways, and given that excluding non-payers is quite easy to do, private entrepreneurs would surely have built such highways ASSUMING that the total value that people likely attached to driving on such highways exceeded the cost of building them. This assumption seems reasonable.

Whether or not the actual constructed mileage of the private highways would have been 50,000, or something less or more, is a different question.

Persons who doubt this likelihood can consult history. In his excellent 1998 book "The Wealth and Poverty of Nations," Harvard economics historian David Landes points out that one reason England industrialized before France is that England, unlike France, had an extensive network of privately built and operated turnpikes.

Surely if technology and capital markets were sufficient in 18th-century England to permit private entrepreneurs to profitably build limited-access toll roads, technology and capital markets in 20th-century America were up to the task.

DAVE March 31, 2009 at 3:54 pm

"Set up a toll for the other 58%"

Common fallacy my friend.

The minute you set up the toll thus raising the cost of using the bridge, it will no longer be 58%. My bet is nowhere near that.

Daniel Kuehn March 31, 2009 at 3:56 pm

Christopher Renner -
RE: "What happens, instead of the market being unable to finance a project due to astronomical up-front costs, it is simply unwilling to build projects which will be minimally used. In other words, bridges to nowhere – and this is where, and why, the politicians step in."

Certainly that happens. But you can't level that criticism against the interstate highway system. However it was sold, there was no market effort to build it. And yes, in many of the cases the market may do it eventually – just slower.

I think your statement on transcontinental railroad (and many other roads or canals fall under this too) is important – "government intervention" doesn't have to be FDR coming in and hiring a lot of unemployed workers to build something. Sometime introducing new incentives to private actors is what's appropriate. I'm not trying to dispute the private incentive to erect important infrastructure.

Internet is another good example. We can leave aside Al Gore's self-aggrandizement for the moment. Now, would the market have created the internet eventually? Probably it would have. But I'm personally glad DARPA and largely public-university researchers jump started that.

People seem to have this image of a heavy handed state ordering private actors around when I bring these things up. Oil Shock, while not responding to me, posts a mises.org post that discusses a "beneficial, benevolent master". That's not what I have in mind. That's not how the government has acted in the past on infrastructure projects.

One other government jump-started infrastructure that I'm interested in is space travel and exploration. At some point in the future – maybe a century from now, maybe two centuries from now – humans will colonize the solar system. Already the private sector is picking up this project – but it was initiated by governments, and government space programs will continue to play this important role in the long-term advancement of the species.

Crusader March 31, 2009 at 3:57 pm

Oil Shock – no doubt there could have been other uses for the land other then what the current zoning laws have decreed. However it's pure fantasy at this point and we have to accept what we have and move on. At this point the government is de-factor creator of all wealth.

Daniel Kuehn March 31, 2009 at 3:59 pm

DAVE -
RE: "Common fallacy my friend – The minute you set up the toll thus raising the cost of using the bridge, it will no longer be 58%. My bet is nowhere near that."

OK, then demand will lower. Microsoft can set the toll to whatever is appropriate to cover the costs of building the bridge. I fail to see your point.

Crusader March 31, 2009 at 4:00 pm

Daniel – you seem to be a reasonable guy. Do you see anywhere in industry where government does NOT have a role?

vikingvista March 31, 2009 at 4:01 pm

"if it weren't for the state, we wouldn't have 50K miles of interstate highways?"

What makes you think we are better off with the current 50 Kmiles of interstates than with the alternative, including the money left in our pockets?

Surely you are aware of the fact that private roads exist. Surely you don't think that builders of private roads would just sit back and ignore a huge demand for roads, if such a demand existed.

Crusader March 31, 2009 at 4:06 pm

vikingvista – it's only a matter of time before the government steps in and takes over private roads too. Society is definitely trending away from property rights ATM.

Daniel Kuehn March 31, 2009 at 4:07 pm

Don -
RE: "Given that people clearly value the ability to drive on limited-access highways, and given that excluding non-payers is quite easy to do, private entrepreneurs would surely have built such highways ASSUMING that the total value that people likely attached to driving on such highways exceeded the cost of building them. This assumption seems reasonable."

As a general statement, I think this is right. But isn't that argument very dependent on the discount rates of those who supply the roads vs. those who demand it? Assuming road users have lower discount rates than road builders (I think that's a pretty fair assumption), I think you've MAY have a classic case of an intertemporal market failure. I may be expressing that poorly, and I may have to think that through.

Obviously whenever you're ascribing discount rates to anyone it's risky business – as the IPCC has demonstrated.

Daniel Kuehn March 31, 2009 at 4:15 pm

Crusader -
RE: "Daniel – you seem to be a reasonable guy. Do you see anywhere in industry where government does NOT have a role?"

Ya… most of them. I don't know if I understand what motivates the question. I've listed the ones I think are clear and persistent cases for intervention: primary education, R&D, large infrastructure… probably others but those come to mind. Finance industry normally shouldn't have too much intervention (some basic rules and reporting requirements), but obviously when the finance industry is at the center of a major recession I'm going to temporarily reevaluate. I mean – I support basic workplace safety/child labor/minimum wage laws to cover all industries. But generally speaking, I don't automatically jump to regulation! lol

DAVE March 31, 2009 at 4:32 pm

"Microsoft can set the toll to whatever is appropriate to cover the costs of building the bridge."

They can't just set the toll arbitrarily, because demand will drop sure as the sun every time they will raise it.

The point is all the same Daniel.

If it were worth Microsofts while to build a bridge, they would likely have done so already. The fact that they didn't means that even they agree that the money could be put to better use somewhere else.

Now the very same applies to every single government project outside of building jails.

Christopher Renner March 31, 2009 at 4:32 pm

Daniel Kuehn, I think that the question ends up being, "How much government expense is worth a certain type and quantity of infrastructure being built how much quicker?"

As for the transcontinental railroad – I really don't think it was necessary on economic grounds. It could be justified as national defense, perhaps(e.g. promoting the settling of Utah, Nevada, etc. thus making them more secure, or keeping commerce between California and the Eastern US within our own more secure borders), but there really wasn't any economic development that you can definitely trace to that particular railroad.

As far as the internet – since the marginal cost to taxpayers of extending it to the general public was so low, that's not a tough call, but I'm not sure how much it cost in the first place to develop when it was still DARPA.

Finally – the space program. However much of a psychological achievement it may have been for the country, its ROI is colossally negative. We've spent probably a trillion dollars to one-up the Soviets, invent Tang, and indulge the whims of a great many scientists and engineers, but what practical value has that had?

Daniel Kuehn March 31, 2009 at 4:41 pm

Dave -
RE: "If it were worth Microsofts while to build a bridge, they would likely have done so already. The fact that they didn't means that even they agree that the money could be put to better use somewhere else."

Did you miss the memo that I don't think the government should contribute a penny to this project, and that Microsoft should build the bridge and set the tolls to whatever level makes sense, given demand for the use of the bridge?

Or perhaps they get enough value out of the bridge themselves that they won't need to set a toll to recoup the costs – that would be great too.

vikingvista March 31, 2009 at 4:45 pm

"The fact that they didn't means that even they agree that the money could be put to better use somewhere else."

Well said.

Instead of asking every Congressman "Do you swear to protect…the Constitution" (which they readily lie about), they should instead be asked a test of knowledge:

"What is wealth creation? How does it differ from wealth transfer?"

Daniel Kuehn March 31, 2009 at 4:45 pm

Christopher Renner -
RE: "but there really wasn't any economic development that you can definitely trace to that particular railroad."

I'm interested in and read a lot of history, but this is kind of outside the period that I read… however… I would assume a lot of economic development in California can be traced back to the transcontinental railroad. I can't imagine it would be the economic powerhouse that it is today without it.

That having been said, I completely agree with the underlying question you pose: "How much government expense is worth a certain type and quantity of infrastructure being built how much quicker?"

RE: "Finally – the space program. However much of a psychological achievement it may have been for the country, its ROI is colossally negative. We've spent probably a trillion dollars to one-up the Soviets, invent Tang, and indulge the whims of a great many scientists and engineers, but what practical value has that had?"

Well, this is where the discount rate question I posed to Don comes in. It has a colossally negative ROI given what time horizon? Given what discount rate? Are the private actors involved even considering costs and benefits centuries from now? Most likely they aren't. So they may be able to make an efficient static decision, but it's less clear to me that they can make an efficient intertemporal decision (which is not to say that government is up to the task either).

Daniel Kuehn March 31, 2009 at 4:51 pm

vikingvista -
RE: "Instead of asking every Congressman "Do you swear to protect…the Constitution" (which they readily lie about), they should instead be asked a test of knowledge"

Remember – they're swearing to protect the Constitution, not vikingvista's personal brand of constitutional law. Quite a strong assumption for you to say that they're lying.

Sam Grove March 31, 2009 at 4:53 pm

Ah yes. Clearly the government had nothing to do with getting the railroads built. I'm not saying the private sector should be shut out – just that there may be a role for government.

Government had nothing to do with profitable railroads getting built, and there were a few of those.

As for the others, money knows how to talk politics. The government granted huge parcels of land to certain railroad companies, in exchange, those railroads provided transport to government troops to "take care" of the Indian problem.

Is it that Keynesian economics only looks at the accounting and never the unaccounted costs?

Sam Grove March 31, 2009 at 4:56 pm

The part of the space program that has had a significant ROI is telecommunications.

It would be presumption, I think, to claim that private industry would have ignored the profit opportunity.

vikingvista March 31, 2009 at 4:58 pm

"but what practical value has that had?"

You mean besides setting space travel back 30 years?

I love space technology. That's why I put more hope in efforts like Virgin's to establish a sustainable (i.e. profitable) space travel industry.

In 1950, Heinlein brought us a vision of space travel in the film "Destination Moon", where industry leaders came together to privately finance a moon project. Sadly, about 2 decades later a cold war set us on a politicized wealth-destroying course which established a government monopoly, and all but died when the political goals were met.

Sam Grove March 31, 2009 at 4:59 pm

they're swearing to protect the Constitution,

When politicians and many other swear to protect the constitution, what they really mean is that they will defend the established order, and their position in it, regardless of what the constitution does or does not authorize. Hence, for many, if not most, police officers, and soldiers, their oath translates into adherence to the chain of command.

Crusader March 31, 2009 at 5:02 pm

Daniel – you mentioned R&D as requiring government intervention. What do you mean by that?

Daniel Kuehn March 31, 2009 at 5:03 pm

vikingvista -
RE: "Sadly, about 2 decades later a cold war set us on a politicized wealth-destroying course which established a government monopoly"

OK, I'm not going to dispute that the Cold War was a sad affair, but could you elaborate a little bit more on what you mean by "a government monopoly"? Did they preclude activity by the private space industry? I didn't think they did – but if they did, I'd simply respond "well there should have been a public program with no restrictions or monopolization of private efforts".

I think Virgin and the U.S. government compliment each other.

Daniel Kuehn March 31, 2009 at 5:10 pm

Crusader –
RE: "Daniel – you mentioned R&D as requiring government intervention. What do you mean by that? "

Simply the fact that the market underinvests in basic R&D particularly – the standard Arrow and Nelson kind of stuff. I think Hayek even wrote some about the problem of information asymmetries in basic R&D that made market provision a problem.

The "intervention" is simply NSF/NIH type funding of basic research – not "regulation" of private research (since the problem is essentially an underinvestment problem).

Daniel Kuehn March 31, 2009 at 5:12 pm

Sam -
RE: "what they really mean is that they will defend the established order, and their position in it, regardless of what the constitution does or does not authorize"

That's quite jaded! Certainly this applies to many. I wouldn't say our representatives don't care what the constitution does or does not authorize, though.

Alright – I'm out for the night.

DAVE March 31, 2009 at 5:13 pm

Daniel, I understand you clearly re. the bridge.

I only wonder why you do not apply the same reasoning to all other government spending not directly related to their natural function.

vikingvista March 31, 2009 at 5:14 pm

"not vikingvista's personal brand of constitutional law"

Yes, DK. It's all subjective isn't it? What I use are just "words". You know, like that silly meaningless word…what was it you called it…oh yeah, "freedom". A random string of characters.

Wouldn't it just be better if everyone else just shut up and let those whose words actually mean something, like DK's, speak?

You gave up any claim to rational argument when you disregarded concepts for character strings.

DAVE March 31, 2009 at 5:20 pm

Daniel,

the comments are going to pile up. go now and you'll have your work cut out for you tomorrow morning.

vikingvista March 31, 2009 at 5:27 pm

"regardless of what the constitution does or does not authorize"

You mean it doesn't authorize firing a CEO? It doesn't authorize retroactively taxing a small group of individuals at a new ex post facto 90% rate? How about regulating our breath as a pollutant?

I can't count the number of times I've read the USC, dissected its clauses, cross-referenced the Federalist papers and historical documents. Eventually one must simply conclude that that document describes a very different country.

DAVE March 31, 2009 at 5:43 pm

"I wouldn't say our representatives don't care what the constitution does or does not authorize, though."

uh huh.

Except the constitution doesn't really authorize as much as it regulates government. That's it's primary function. It leaves politicians with powers that are enumerated. Otherwise it's "Congress shall make no law………"

That's what most politicians fail to comprehend. Most days they would be more in line with the constitution if they were out on the golf course or watching seinfeld reruns on the couch than doing any actual work legislating whatever liberties are left to people who have real jobs.

vidyohs March 31, 2009 at 6:29 pm

Two Trillion Tons – Tenn Ernie Ford classic updated.

http://www.box.net/shared/xtldf5p8gm

click play

{ 1 trackback }

Previous post:

Next post: