Quotation of the Day…

by Don Boudreaux on August 3, 2011

in Country Problems, Politics

… is from the late G. Warren Nutter, a University of Virginia economist who from the late 1960s through the early 1970s served as Assistant Secretary of Defense:

In the academic world, you think now and decide never; and in the government, it’s just exactly the other way around.

Explains a lot.

Nutter here is quoted in the fascinating paper by William R. Allen (of Alchian & Allen fame), “Economics, Economists, and Economic Policy: Modern American Experiences,” History of Political Economy (Spring 1977), Vol. 9, pp. 48-88.  This Nutter quotation is found on page 51.

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{ 31 comments }

RHFrank August 3, 2011 at 8:18 pm

I liked Robert H. Franks piece the best. Unemployment is more important than the deficit. Since he’s an economist, the rest of Cafe Hayek can’t just dismiss him out of hand. (they will anyway)

Don Boudreaux August 3, 2011 at 8:22 pm

Even if Frank is correct (by whatever scale he uses to measure such things), there remains the open question of to what extent, if any, does deficit spending decrease unemployment. It will not do simply to assume that larger deficits reduce unemployment.

The fact that this assumption is made so frequently in the media and in academia does not justify it. The fact that Bob Frank is an economist does not justify his making such an assumption.

Chucklehead August 3, 2011 at 10:28 pm

Unemployment is more important than the deficit. The deficit is a vehicle government uses to displace private savings and investment for beneficial purposes, causing more unemployment. With every government job, you can displace 1.6 private sector jobs. Those jobs can regulate and prevent even more private sector jobs to expand the multiplier, not just now, but into the future. This should result in more despair, dependence and class envy. What more could you ask for.

Greg Webb August 4, 2011 at 10:37 am

Chucklehead, thank you for your well written and insightful analysis! Really well done!

And, I think that you have already mentioned my point when you said “[t]he deficit … displace[s] private savings and investment for beneficial purposes.” But, I will elaborate a bit on it.

Government jobs do not result in the effective and efficient production of goods and services that consumers actually desire. For example, the government funding of the creation of tunnels to allow turtles to safely cross roads in Florida that Jamie Whyte mentioned in the Keynes v. Hayek debate on the BBC. Private sector jobs, however, are required by market forces to effectively and efficiently produce goods and services that consumers actually want. For example, iPhones. Therefore, government jobs reduce the wealth of this country, while private sector jobs increase its wealth.

Private sector companies that fail to effectively and efficiently produce goods and services fail, unless the government intervenes to protect political cronies. If allowed to fail, the loss in wealth to the nation stops, and the capital transferred to others who will have an incentive to effectively and efficiently employ that capital for productive purposes in the hopes of making a return on their investment. If not allowed to fail, the loss in wealth continues. And, the formerly private sector jobs effectively become government jobs.

Chucklehead August 4, 2011 at 9:43 pm

Initially I thought that government spending was wasteful, now I realize it to be detrimental.
I remember filling out EPA toxic waste forms on the amount of copper I processed, and how I disposed of it. First I thought if this is so toxic, why do we use copper pipes for all of our water? Second was, who throws copper scrap away? Scrappers love the stuff and will pay several dollars a pound. Instead, I get to waste a afternoon wasting paper forms instead of doing something productive.

Invisible Backhand August 4, 2011 at 10:20 am

” the open question of to what extent, if any, does deficit spending decrease unemployment. It will not do simply to assume that larger deficits reduce unemployment.”

That’s a little over simplified, (reduced to an absurd degree, as it were.)

Everything I heard, and I heard a lot, talked how what you spent the money on was important. Remember how often you heard “shovel ready project” in the media? (google returns 368,000 hits for that).

But maybe you never heard that.

Ken August 4, 2011 at 10:39 am

IB,

It’s not simplified at all. Keynes explicitly say it doesn’t matter where money is being spent, as long as aggregate demand went up. I heard about shovel ready projects from Obama’s mouth. They weren’t politically attractive enough for him, so he spent it on automotive and bank bailouts.

Regards,
Ken

Invisible Backhand August 4, 2011 at 1:54 pm

My personal nickname for you after you forgot about the deregulated industry that caused the financial crisis was ‘forgottosendregardsken’, but I’m just going to change it to ‘nonsequiturken’.

Ken August 4, 2011 at 1:59 pm

IB,

There was no deregulated industry that caused the financial crisis. The regulations surrounding Fannie Mae and Freddie Mac, were the primary drivers behind the financial and housing crisis you mentioned in a previous comment.

Regards,
Ken

Greg Webb August 4, 2011 at 10:41 am

Even Obama laughed and said that those jobs weren’t too shovel-ready. And, that is exactly what politicians do — they spend other people’s money on silly projects that help only their political cronies and then laugh when reality arrives and it is clear to everyone that all their previous talk about helping those directly affected by the recession was just nonsense.

Invisible Backhand August 4, 2011 at 1:58 pm

He traded away two more years of the Bush tax cuts to get the extension of unemployment benefits. Was that nonsense?

Dan H August 4, 2011 at 2:02 pm

@IB,

Yes that was nonsense. The tax cuts should have been made permanent, possibly lowered even more, and unemployment benefits should not have been extended.

Ken August 4, 2011 at 2:02 pm

IB,

Yes, it’s nonsense for the government to provide unemployment “benefits”.

And what does this have to do with the shovel ready jobs Greg mentioned?

Regards,
Ken

Greg Webb August 4, 2011 at 5:59 pm

Invisible B, it is nonsensical for the federal government to be using other people’s money to pay unemployment benefits. It discourages anyone from saving for the proverbial rainy day. It does happen so prepare now for future problems by saving 6 months living expenses. Also, one should not be so arrogant to refuse work that may pay less in the short term while he or she looks for other employment. Why should others who are prudent pay for someone else’s risky activity?

The federal government must justify its expenditures and what it takes from the citizens to pay for those expenditures. Otherwise, we become slaves of foolish politicians. With the “Bush tax cuts, the federal government merely returned to its rightful owners that which was inappropriately taken from them through government coercion.

Chucklehead August 4, 2011 at 9:59 pm

For a while I thought I might be a closet Keynesian, and was about to check myself into rehab because I am fond of infrastructure spending in a downturn. Then what I realized is what I was fond of was purchasing needed durable goods in a down market. If you need a place to live, now would be a better time to buy one than a few years ago. If you need sewer work, you can slip-line a sewer and extend its life for another 50 years for less than the cost of digging it up. It is not a bad time for roadwork with falling labor and oil costs, if you need that road. As long as you don’t have some Davis Bacon or similar rule that makes you overpay, and the road does structurally need to be replaced, with interest rates low, now is a good time.
The problem, is the structure of government so inept that it incapable of purchasing just what you need, at its best price. I see no evidence in Washington that it is. To overpay for some bridge to nowhere is just Keynesian (Stupid.)

rbd August 3, 2011 at 9:07 pm

And in the private sector, both occur simultaneously, at least in successful enterprises.

Dan J August 4, 2011 at 2:21 am

Interesting how there is always an opinion to be given by someone to justify, give creedence to, or excuse actions by irresponsible govt representatives or policies. Should a major player in the Obama admin or demoncrat party openly admit to Marxism and his/her efforts to have implemented it over the years, some columnist, tv talking head, or ‘expert’ will comment on the gains to be had from the sick religion or belittle any adversaries of the sick religion of Marxism.

Molon Labe August 4, 2011 at 3:30 am

In my experience both cultures discourage thinking . Both recoil in horror at the thought of having to make a decision. The Dept. of State excelled at ignorning any sort of planning or confronting problems until a full blown disaster had errupted. They then hoped the Marines would be sent in to solve the problem.

vidyohs August 4, 2011 at 10:04 am

“In the academic world, you think now and decide never; and in the government, it’s just exactly the other way around.”

That amounts to a clever slogan, and it is a mistake to take a slogan for the absolute universal truth. For instance in the slogan above, the truth in it is relative to which government bureaucrat is meant, and which school is meant.

I knew plenty of people in government who were good and careful thinkers and who had the ability to make good quick decisions. True they were in the general minority, but it is still a sizable minority and explains why many people quit government service and/or resign or take a discharge from the military because they get tired of beating their heads against the wall of bureaucratic culture that knee jerks to conventional wisdom if it jerks at all.

I also know that there are many schools across the nation that turn out excellent engineers, mathematicians, doctors, physicists, etc. et. al. who have no problem thinking now and deciding now. Perhaps it is in the fields of the theoretical like economics where thinking now and deciding later is more likely.

Krishnan August 4, 2011 at 11:34 am

There are schools that do turn out good engineers, scientists (and perhaps even economists) … but the quote is right on. There is so much that goes on in the halls of academia that are a total waste of time and driven by inflated egos from people who have nothing of any importance to say or do. That inspite of a poor environment in many cases and poor management, students graduate and are intellectually better than they were when they came in is a testament more to the students’ skills (and yes, a few professors) than the environment.

There is a real crisis in Higher Education also (so, not just K-12). Slow but steadily, the value of an undergraduate education is being eroded – I’d say deliberately – in response to the “customers” – those students (and their parents) who think that the acquisition of that degree in “engineering” is the ticket to wealth and riches. Yes, the rot is not confined to the “Liberal Arts”, I am afraid. Grade inflation is rampant – and employers may soon find out that reliance on simply the grades from almost any university is not worth the paper it is printed on. Yes, I am making sweeping generalizations and there are exceptions – outstanding exceptions for sure. Overall though, we are witnessing a deliberate decline in what universities are doing to a) reduce the time to get that “degree” and b) inflate grades in response to demands from “customers”. You get (a) by making it Ok to “double dip” – in many cases, let students double count courses towards Masters (because a Bachelor’s is useless) and get to (b) by putting subtle (or in many cases not so subtle) pressure on faculty – and even ones who can resist the pressure, often fold.

vidyohs August 4, 2011 at 3:52 pm

Don’t sell me short, Krishnan. I know all of what you are saying, and I have known it for a very long time, going back to at least 1973/74. I took U. of Maryland extension courses in Spain and the grade inflation was known and acknowledged then as being nothing new. The instructors attributed it to the baby boomers and their selfish spoiled aggressive attitudes towards the education process in general. Mommy and Daddy told them all their life they were “so special”, so how could a “so special” kid receive a D or F on a paper or test, well of course it had to be the professor’s or the university process that was at fault.

The baby boomer is a person who was just a few short years younger than I, but God what a difference in general attitude towards life. You might have read Don’s recent comments about his background and what it gave him in the way of beliefs and character, well I come from the same kind of background only it was central Texas dirt scrabbling farmers and ranchers. Now you put me in charge of a crew of thumbsucking slacking spoiled navy recruit baby boomers who all thought that by breathing they deserved promotions and vacations, and it doesn’t work out too well.

I also am very well versed in what goes on in government service and the attitudes displayed there, possibly as much or more than anyone who comes here to the cafe, I was in the belly of the beast for a long time, much much too long as I look at it in retrospect.

My whole point was that Nutter’s clever statement, could be sloganized and taken as a universal truth, which would be a mistake because it is a generalization, not universal.

Krishnan August 4, 2011 at 8:16 pm

“sell you short” … Oh no … I was not trying that (!) … (unless you are listed on the NY Stock exchange and I can make money by selling short? Looks like the market will dive …)

Seth August 4, 2011 at 11:40 am

Perhaps I’m reading too much into it, but I took it to be more of a commentary on what the feedbacks generally reward in academia and government.

Greg Webb August 4, 2011 at 10:47 am

Don, I think that Nutter’s quote was interesting, but not entirely accurate. His quote was: “In the academic world, you think now and decide never; and in the government, it’s just exactly the other way around.” But, I think that it is more accurate to say “In the academic world, you think but don’t have the power to implement your ideas; and in the government, you are trying to CYA while at the same time trying to appear that you are relevant and making a difference.”

Krishnan August 4, 2011 at 11:43 am

Any particular classroom used to be the exclusive domain of the instructor – who had the power to do amazing things with the subject matter and challenge students. That is no longer the case. The intrusions are many and almost always seeking to make sure that fewer and fewer revenue generators leave and cause financial distress.

Valerie Wingfield August 4, 2011 at 3:22 pm

“In the academic world, you think now and decide never; and in the government, it’s just exactly the other way around.”
Government officials decide now, because they have no choice but to decide now. They, specifically those leading a twisted Republican v Democrat partisan-focused way of democracy, are there not to push anything important through necessarily, but to just push something through for power’s sake. Median votes = “crowd pleasers”. The mass of followers that they string along with them need to be told something , anything, that looks good, albeit shoveled-out legislation and policies. Greg Webb’s comment mentioned a perfect example of this:
“Government jobs do not result in the effective and efficient production of goods and services that consumers actually desire. For example, the government funding of the creation of tunnels to allow turtles to safely cross roads in Florida that Jamie Whyte mentioned in the Keynes v. Hayek debate on the BBC.”
Turtles!? I mean… really? I’m 1000% positive that those funds could have been allocated in a much more maximizing way to HUMAN capital or otherwise with other USEFUL programs (to the majority of us who do not stake life-or-death on the well being of turtles). How about, lets see… I don’t know… giving the funds to educational programs that have already been hacked to death, so that we can continue to “think now” about how stupid their “deciding now” is. Maybe then, will we be able to come to a decision.

Dan H August 4, 2011 at 3:27 pm

There’s already an education bubble (specifically higher education). How about giving the money back to the people to which it belongs? i.e. the 51% of Americans who pay federal income taxes.

vidyohs August 4, 2011 at 3:55 pm

Why not simplify the process even farther, stop taking the money in the first place, then you don’t have to hire people to collect it and send it back.

Krishnan August 4, 2011 at 4:47 pm

When Government types talk about the “velocity of money” this is what they mean – Take it from A, using B and send it to C – they will argue that there is a multiplier effect – that the $1 from A becomes $1.15 by the time it goes to C (they ACTUALLY believe it)

So, of course they will not simplify it as you suggest …

Dan J August 4, 2011 at 5:19 pm

They just see it as better spent. Only, the govt geniuses can possibly know best as to allocation.

Kirby August 4, 2011 at 5:21 pm

You’re forgetting Muirgeo. He doesn’t work for the gov’t.

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