7 ms·

Debunking “America has become so anti-innovation – it's economic suicide”

25 points by subverter 9y ago

sschueller 9y ago
Why does he list Bitcoin as an American innovation? Or did I miss read that.
- subverter 9y ago
  I can see how that's confusing. I was thinking in broader terms of the private sector with that one. Although there is American innovation happening there, it's certainly not the only place.
- burkaman 9y ago
  It's sort of a stretch, but nobody knows who Satoshi is and many of the major players are American. The Bitcoin Foundation is American, the first user[1] is American, the predecessor to Bitcoin was developed by an American[2]. [1] https://en.wikipedia.org/wiki/Hal_Finney_(computer_scientist) https://en.wikipedia.org/wiki/Hal_Finney_(computer_scientist... [2] https://en.wikipedia.org/wiki/Nick_Szabo https://en.wikipedia.org/wiki/Nick_Szabo
  - ska 9y ago
    For this sort of distributed project, it's mostly inept to attempt to nationalize any claim to innovation anyway. Not that it will stop countries from doing it, but it's all rather silly.
atmosx 9y ago
> When the government floods the economy with cheap money printed out of thin air, it distorts market indicators, making many unprofitable projects appear profitable. Oh, is that a new one? It's the first time I read someone stating that when VCs get high on drugs and spend their money on stupid ideas, it's because of something the government did.
- pixl97 9y ago
  >Oh, is that a new one? Not at all. We dealt with a similar collusion between the government and private banking industry in the housing collapse of 2008. Cheap money along with bad policy is problematic no matter where it occurs because the cheap money ends up in the stock market/speculation market eventually.
  - VHRanger 9y ago
    There's very little serious literature that points to "cheap money" as a source cause of 2008. Neither does banks taking risks because they are "too big to fail". The main cause you get by reading the research on 2008 is that bank managers were incentivized by their shareholders to take excessive risks. This is because 1) shareholders are pretty shortsighted and 2) managers suffer comparatively little personal consequences by crashing a bank (clearly they don't go to jail; they still get the massive bonuses in the years where they pumped returns with excessive risks, etc.)
    - pixl97 9y ago
      >bank managers were incentivized by their shareholders to take excessive risks. Which is no different than supplying money to a market below cost. Any market failure that leads excessive lending will lead to asset inflation and reinvestment of that money in speculation.
- padobson 9y ago
  It's not new at all. It's actually fairly easy to demonstrate. I recommend Murray Rothbard's America's Great Depression[0] from 1963. The quick hit is this: A. US Monetary policy provides large banks with extremely cheap capital B. Large banks competing with each other in the free market must make use of that capital C. Only so many investments are good investments, because in the end, there's only so much consumption, but the unnatural levels of capital driven by US monetary policy push banks to make bad investments (see every financial crisis since the Fed was founded). D. Those bad investments fail, and mass margin calls lead to an economy-wide de-leveraging that destroys economic growth for months or years. Systemic financial crises can't happen without cheap, printed money. It's also reasonable to question whether giant companies could exist at all without US monetary policy. Companies of that size are almost completely dependent on the financial industry, which is completely dependent on the Fed's cheap currency. [0][PDF]https://mises.org/files/americas-great-depressionpdf-0/download?token=rwW4UjXa https://mises.org/files/americas-great-depressionpdf-0/downl... Edit: added PDF label
mjfl 9y ago
> The truth is government and the public sector is where innovation, and the money that fuels it, comes from. Bell labs? Xerox Parc?
- TallGuyShort 9y ago
  And because the private sector doesn't have anything to do with where the public sector gets it's money.
- subverter 9y ago
  What you quote is part of the summary of the article I critique. To avoid any confusion, that's certainly not what I believe. :) That said, both of those are good examples that I don't even mention in the article.
sharemywin 9y ago
The problem is the VC, stock market and the economy are becoming a giant monopoly(monopsony) engine. It's stupid to invest in competition. VCs invest "small"(way larger than the average person can afford to start) bets on a few companies so they can dump a large amounts on the winners. Once the companies have passed the test they go to the stock market to raise even more money to further entrench their monopoly. It used to be the market was justified because competition drove innovation and choice, but investors don't invest in competition.
- sharemywin 9y ago
  Think of it like a systems problem. You'll only find local minima/maxima with greedy algorithms.
Crye 9y ago
I'm tired of these articles. Seriously. Government has funded hi-tech through the military for the last 70 years. That's not a secret and we wouldn't have what we have now with out it. The government knows this and the large corporations who benefit from it know it. Corporations are not willing to take on the risk to sink billions of dollars to develop a technology which may or may not pay out. Plus once it does pay out, who is to say China isn't going to steal the tech and then undercut the very thing they just developed. He cites SpaceX as this idea of private investment, completely overlooking the fact that the government is subsidizing the whole endeavour. Please....
- valuearb 9y ago
  Why would you fund billions in research if you can get government handouts?
  - mark_edward 9y ago
    The same reason you'd fund it without them, for a competitive edge. If you're getting handouts and everyone's getting handouts you still have incentives.
- kbenson 9y ago
  > He cites SpaceX as this idea of private investment, completely overlooking the fact that the government is subsidizing the whole endeavour. Please.... Take your pick of any of the major US industries. Chances are the successful players they take a lot in subsidies. None of the Musk companies are really outliers in this, they just get a lot more attention (e.g. GM, Boeing, and GE all take a lot of subsidies).
  - otalp 9y ago
    True that Musk is absolutely not an outlier. But you can't really use him as an example of a company doing all their innovation without any government help. I'd rather the government fund SpaceX and Tesla than Exxon anyway.
acomjean 9y ago
America: Good for innovation! except for the predatory patent lawsuits which as a small business you won't be able to afford the legal bill to defend against.
- subverter 9y ago
  A good topic for a future article!
  - acomjean 9y ago
    I think there is some interesting things going on with patents that need looking into. Especially the root cause. Someone should look at wisdom of making the Patent office self funding, seemingly incentivizing them to give out more patents (if they're valid or not), and having them being seeming immune to penalties for issuing bad patents.
lilei2 9y ago
I don't really follow this: > First, it confuses technological innovation (impressive to engineers) and economic innovation (valuable to consumers). Second, it confuses gross and net benefit — of course, when government does X, we get more X, but is that more valuable than the Y we could otherwise have had? [...] > And don’t forget Bitcoin and the underlying blockchain technology that has the potential to decentralize everything from web apps to logistics. The latter here seems like a rather good example of the former. EU is about to introduces the revised payment services directive (PSD2) which is set to force banks to interface with third parties. I would expect this action to have far greater value to people than the blockchain.
AmIFirstToThink 9y ago
Government does engage into efforts/projects that end up being wasteful. But, market forces should not be heralded as panacea of there being no-waste. Every private sector bankruptcy is wasteful for its investors. Yahoo, HP, Former Dell, Anderson Ton of examples of failed efforts, pure waste, nepotism, bribery and downright illegal (civil/criminal) behavior in private sector. I look at it this way... The will of the people also acts as a market force. I think most would agree with that. Whether there is waste or if it is most efficient, is immaterial. Will of the people, in terms of government's willingness to legislate, will always be a market force. Push and pull is given and is to be expected. Let the battle rage on.
- pixl97 9y ago
  You will fail (almost all of the time). People tend to forget that when talking about waste. Almost every project, company, idea will end in failure. Pointing at the successes around us is a case of survivorship bias. Government projects fail all the time. Company projects fail all the time. Personal projects fail all the time. So, looking at failures is really useless, it tells us nothing. In the end we have to look at return on investment. If the government spends $1 billion and $500 million is completely wasted, yet they get a $700 million return on the other half, that's not a bad deal. It's even better if that is money that private industry would have never invested in said technology. And private industry is just as apt to chase bubbles leading to massive losses. When it becomes more profitable for private industry to invest in speculation in the short term a bubble occurs almost every time, followed by large economy damaging losses.
  - ThomPete 9y ago
    Agree completely, however companies tend to have better feedback loops to point to lack of ROI.
    - AmIFirstToThink 9y ago
      Better or shorter? Must-solve, long shot things like GPS, Internet, Modern Weaponry require resolve behind it to make it happen. I am sure those programs had hundreds offshoots trying things out to solve problem, to see if it works, within the umbrella of that major effort e.g. GPS. ROI measured in terms of money results in drug companies chasing chronic pills than cures. That need not be the only measure.
otalp 9y ago
Interesting that he mentions Elon Musk when his companies are literally kept alive by billions in government subsidies and contracts. I don't like the binary view of "Give all power to corporations, with no government intervention" and "Let the state control all means of research and access" The ideal is clearly in between, where the state should break up monopolies and punish companies that have detrimental externalities to their functioning(like polluting the environment). That's not to dismiss government funded research either. We have Computers and The Internet in large part due to US Government research. Once an idea becomes marketable and profitable, private companies can swoop in, like Microsoft or Apple with Computers. But decades of unprofitable research is not feasible in a corporation. You would need the government to fund that.
- subverter 9y ago
  I get what you're saying. It's a common view that balances the two ends of the spectrum, as you point out. There was an article just a few days ago by Farhad Manjoo entitled Google, Not the Government, Is Building the Future (https://www.nytimes.com/2017/05/17/technology/personaltech/google-not-the-government-is-building-the-future.html https://www.nytimes.com/2017/05/17/technology/personaltech/g...) that I think captures your viewpoint well. I'd like to spend some time digesting it, after which I'll likely write some thoughts.
- maxxxxx 9y ago
  In the US it's not ok to discuss a balance between different approaches. Either private business/government is all good or it is all bad.
- Robotbeat 9y ago
  "Interesting that he mentions Elon Musk when his companies are literally kept alive by billions in government subsidies and contracts." Your point would be stronger without this falsehood. Both SpaceX and Tesla could do business without subsidies and government contracts. There were times during the worst parts of the Great Recession when this WAS true (and both businesses benefited from the technology and general environment enabled by government investment), but it's not "literally" true any longer that they're "kept alive" by government subsidies or contracts. Most of SpaceX's are non-US-govt satellites now, and SpaceX doesn't receive launch support subsidies like ULA. Tesla would still sell a lot of cars without the EV tax credit (which goes to the consumer, not Tesla, by the way... and is a bigger proportion of their competitors' car value than their own). Both companies would need to pull back growth without govt contracts and incentives, but to say they are today literally kept alive is blatantly false. And your false claim undermines your central point, actually. If innovative corporations need government subsidies indefinitely to literally stay alive, then government-funded innovation isn't competitive and all government is doing is propping up industries instead of making R&D investments that pay off in long-term growth.
stephen_g 9y ago
Classic Austrian economics. There's a clear misunderstanding throughout the whole article about how money works, which is typical of the entire school. This sentence is illuminating: "... monetary expansion, the latter of which causes prices to go up and the purchasing power of the dollars in my pocket to go down." That is not necessarily true, and in fact is often false. That is called the 'quantity theory of money', and for all its faults even mainstream economics doesn't buy into that anymore... It does appear intuitive - if there is more money in existence then existing money is worth less, right? There's even an identity that 'proves' this, PY = MV. Well, no. For price rises to be the case, the economy must be both at full capacity and full employment. It is also thinking about the problem statically, assuming that the amount of goods and services in the economy does not change to respond to an increase in demand. In the real world, economies actually have a lot more capacity to absorb extra money than people think (many people are spooked by cases like Zimbabwe and Venezuela, whose problems in reality were caused by completely different factors). And the Austrian mistake of assuming that monetary expansion == price inflation is dangerous, because if implemented the kind of policy leads to effectively controlling inflation by causing unemployment.
- padobson 9y ago
  >For price rises to be the case, the economy must be both at full capacity and full employment. Who's using intuition now? Stagflation in the 70's is a pretty jarring counter-example. We're living in an interesting economic time where Keynesian policies seem intuitively more effective than Austrian economics. Afterall, the Fed has been printing money like mad for the last 20 years, and there's no worrying inflation to be found. But there's an argument to be made that prices should be much lower than they are - that the scale of automation and globalization that we've seen has put enormous downward pressure on prices, and the currency devaluing effects of Fed monetary policy have put upwards pressure on prices without resultant inflation. So we can still afford a loaf of bread without having to push a wheelbarrow full of greenbacks up to the register, but the problem has manifested itself in different ways. Most obviously in the growing wealth gap, where those who are most capable of taking advantage of the Fed's cheap currency (the financial industry) have gotten all of the gains from automation and globalization, while the rest of us are stuck with a devalued currency.
frgtpsswrdlame 9y ago
>My point being, these examples show that, without market forces, the government has no indicator as to what’s worth allocating resources to and what’s not. This supposes that the only things worth allocating resources to are things which would be successful in the market place. He mentions public goods in this essay so I know that he's aware of them, why does he ignore their existence here? >Shifting focus from the public sector to the private, the idea that entrepreneurs and corporations are somehow worse at innovating, or don’t invest enough in R&D, is also called into question by many examples to the contrary. Like SpaceX, the aerospace company founded by Elon Musk with the goal of one day colonizing Mars,which recently accepted a $1 billion investment from Google and Fidelity. Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015... Hmm. He also presupposes that public R&D spending will drive out private R&D but that is actually an open economic question. (lots of studies showing them to be complements and lots showing them to be substitutes) This short survey demonstrates that existing empirical studies do not allow for a definitive conclusion regarding the sign of the relationships between publicly and privately funded R&D. Hence, it is still an open empirical question as to whether public R&D funding increases or decreases privately funded R&D. In order to answer this question, more research with more comprehensive datasets is needed. http://aei.pitt.edu/6736/1/1195_30.pdf http://aei.pitt.edu/6736/1/1195_30.pdf >As Ludwig von Mises so eloquently put it... Ah come on, I am so tired of libertarians whose entire economic education comes from reading other libertarian blogs online. Please quote some living economists, maybe even an economist who is still publishing papers. When will we realize this (specific) sort of libertarian for what they are, a utopian. The market can't solve every problem, that's why we have governments in the first place.
pvnick 9y ago
Henry Hazlitt, one of the economists quoted in the article, wrote a book called Economics in One Lesson [1]. It is a brilliant, and very approachable, piece of writing that should be read by everyone interested in the basics of economic theory. [1] https://www.amazon.com/Economics-One-Lesson-Shortest-Understand/dp/0517548232 https://www.amazon.com/Economics-One-Lesson-Shortest-Underst...
mcguire 9y ago
CompuServe called. This internet thing is a government boondoggle. They want their article back.
Quanttek 9y ago
Many already mentioned (at least partially) the fundamental flaws in the economic theory he bases his text on, and also his bad examples (completely ignoring you could provide as many counterexamples of staet-funded innovation and private sector waste) but I just want to emphasize his quotes: Being so obsessed with trying to point out logical fallacies, they don't provide any proof or actual arguments for their side. For example, the third quote literally provides zero evidence for the fact that the market's failures are primarily attributable to government intervention. Collective action theory alone points out how at least parts of the failures will be the market's.
throwaway47861 9y ago
> Other than Juicero and some sweeping statements about the technology, energy, and pharmaceutical industries benefitting from government research, Tarnoff offers little evidence to back up these claims. The "debunked" article is not scientific in 100% of the meaning of the word, that's a fact -- but if we go by the message of this "debunker" this means we must doubt every single deduction we make in our lives, on the grounds of what? Oh, none of us can't access all the information on the planet in real time. Legit as hell, lol. Let's face it, none of us is Skynet-like and yes we will always work with sparse data. Trying to make a good use of those is not a bug. It's a damn good feature. Far too often I am seeing a very perverse and backwards "arguing" on HN these days -- people grossly underestimate our innate human ability to draw rather good conclusions based on incomplete data, and constantly require "scientific proof" about pretty much anything. Science doesn't have data on most of what's happening on this planet however. And that won't change for a long time still. We make do with what we have. The rest are yelling "give me evidence!" in non-deterministic areas like country/world economics. Heh, OK.

25 points by subverter 9y ago

sschueller 9y ago

Why does he list Bitcoin as an American innovation? Or did I miss read that.

subverter 9y ago
I can see how that's confusing. I was thinking in broader terms of the private sector with that one. Although there is American innovation happening there, it's certainly not the only place.
burkaman 9y ago
It's sort of a stretch, but nobody knows who Satoshi is and many of the major players are American. The Bitcoin Foundation is American, the first user[1] is American, the predecessor to Bitcoin was developed by an American[2]. [1] https://en.wikipedia.org/wiki/Hal_Finney_(computer_scientist) https://en.wikipedia.org/wiki/Hal_Finney_(computer_scientist... [2] https://en.wikipedia.org/wiki/Nick_Szabo https://en.wikipedia.org/wiki/Nick_Szabo
- ska 9y ago
  For this sort of distributed project, it's mostly inept to attempt to nationalize any claim to innovation anyway. Not that it will stop countries from doing it, but it's all rather silly.

atmosx 9y ago

> When the government floods the economy with cheap money printed out of thin air, it distorts market indicators, making many unprofitable projects appear profitable. Oh, is that a new one? It's the first time I read someone stating that when VCs get high on drugs and spend their money on stupid ideas, it's because of something the government did.

pixl97 9y ago
>Oh, is that a new one? Not at all. We dealt with a similar collusion between the government and private banking industry in the housing collapse of 2008. Cheap money along with bad policy is problematic no matter where it occurs because the cheap money ends up in the stock market/speculation market eventually.
- VHRanger 9y ago
  There's very little serious literature that points to "cheap money" as a source cause of 2008. Neither does banks taking risks because they are "too big to fail". The main cause you get by reading the research on 2008 is that bank managers were incentivized by their shareholders to take excessive risks. This is because 1) shareholders are pretty shortsighted and 2) managers suffer comparatively little personal consequences by crashing a bank (clearly they don't go to jail; they still get the massive bonuses in the years where they pumped returns with excessive risks, etc.)
  - pixl97 9y ago
    >bank managers were incentivized by their shareholders to take excessive risks. Which is no different than supplying money to a market below cost. Any market failure that leads excessive lending will lead to asset inflation and reinvestment of that money in speculation.
padobson 9y ago
It's not new at all. It's actually fairly easy to demonstrate. I recommend Murray Rothbard's America's Great Depression[0] from 1963. The quick hit is this: A. US Monetary policy provides large banks with extremely cheap capital B. Large banks competing with each other in the free market must make use of that capital C. Only so many investments are good investments, because in the end, there's only so much consumption, but the unnatural levels of capital driven by US monetary policy push banks to make bad investments (see every financial crisis since the Fed was founded). D. Those bad investments fail, and mass margin calls lead to an economy-wide de-leveraging that destroys economic growth for months or years. Systemic financial crises can't happen without cheap, printed money. It's also reasonable to question whether giant companies could exist at all without US monetary policy. Companies of that size are almost completely dependent on the financial industry, which is completely dependent on the Fed's cheap currency. [0][PDF]https://mises.org/files/americas-great-depressionpdf-0/download?token=rwW4UjXa https://mises.org/files/americas-great-depressionpdf-0/downl... Edit: added PDF label

mjfl 9y ago

> The truth is government and the public sector is where innovation, and the money that fuels it, comes from. Bell labs? Xerox Parc?

TallGuyShort 9y ago
And because the private sector doesn't have anything to do with where the public sector gets it's money.
subverter 9y ago
What you quote is part of the summary of the article I critique. To avoid any confusion, that's certainly not what I believe. :) That said, both of those are good examples that I don't even mention in the article.

sharemywin 9y ago

The problem is the VC, stock market and the economy are becoming a giant monopoly(monopsony) engine. It's stupid to invest in competition. VCs invest "small"(way larger than the average person can afford to start) bets on a few companies so they can dump a large amounts on the winners. Once the companies have passed the test they go to the stock market to raise even more money to further entrench their monopoly. It used to be the market was justified because competition drove innovation and choice, but investors don't invest in competition.

sharemywin 9y ago
Think of it like a systems problem. You'll only find local minima/maxima with greedy algorithms.

Crye 9y ago

I'm tired of these articles. Seriously. Government has funded hi-tech through the military for the last 70 years. That's not a secret and we wouldn't have what we have now with out it. The government knows this and the large corporations who benefit from it know it. Corporations are not willing to take on the risk to sink billions of dollars to develop a technology which may or may not pay out. Plus once it does pay out, who is to say China isn't going to steal the tech and then undercut the very thing they just developed. He cites SpaceX as this idea of private investment, completely overlooking the fact that the government is subsidizing the whole endeavour. Please....

valuearb 9y ago
Why would you fund billions in research if you can get government handouts?
- mark_edward 9y ago
  The same reason you'd fund it without them, for a competitive edge. If you're getting handouts and everyone's getting handouts you still have incentives.
kbenson 9y ago
> He cites SpaceX as this idea of private investment, completely overlooking the fact that the government is subsidizing the whole endeavour. Please.... Take your pick of any of the major US industries. Chances are the successful players they take a lot in subsidies. None of the Musk companies are really outliers in this, they just get a lot more attention (e.g. GM, Boeing, and GE all take a lot of subsidies).
- otalp 9y ago
  True that Musk is absolutely not an outlier. But you can't really use him as an example of a company doing all their innovation without any government help. I'd rather the government fund SpaceX and Tesla than Exxon anyway.

acomjean 9y ago

America: Good for innovation! except for the predatory patent lawsuits which as a small business you won't be able to afford the legal bill to defend against.

subverter 9y ago
A good topic for a future article!
- acomjean 9y ago
  I think there is some interesting things going on with patents that need looking into. Especially the root cause. Someone should look at wisdom of making the Patent office self funding, seemingly incentivizing them to give out more patents (if they're valid or not), and having them being seeming immune to penalties for issuing bad patents.

lilei2 9y ago

I don't really follow this: > First, it confuses technological innovation (impressive to engineers) and economic innovation (valuable to consumers). Second, it confuses gross and net benefit — of course, when government does X, we get more X, but is that more valuable than the Y we could otherwise have had? [...] > And don’t forget Bitcoin and the underlying blockchain technology that has the potential to decentralize everything from web apps to logistics. The latter here seems like a rather good example of the former. EU is about to introduces the revised payment services directive (PSD2) which is set to force banks to interface with third parties. I would expect this action to have far greater value to people than the blockchain.

AmIFirstToThink 9y ago

Government does engage into efforts/projects that end up being wasteful. But, market forces should not be heralded as panacea of there being no-waste. Every private sector bankruptcy is wasteful for its investors. Yahoo, HP, Former Dell, Anderson Ton of examples of failed efforts, pure waste, nepotism, bribery and downright illegal (civil/criminal) behavior in private sector. I look at it this way... The will of the people also acts as a market force. I think most would agree with that. Whether there is waste or if it is most efficient, is immaterial. Will of the people, in terms of government's willingness to legislate, will always be a market force. Push and pull is given and is to be expected. Let the battle rage on.

pixl97 9y ago
You will fail (almost all of the time). People tend to forget that when talking about waste. Almost every project, company, idea will end in failure. Pointing at the successes around us is a case of survivorship bias. Government projects fail all the time. Company projects fail all the time. Personal projects fail all the time. So, looking at failures is really useless, it tells us nothing. In the end we have to look at return on investment. If the government spends $1 billion and $500 million is completely wasted, yet they get a $700 million return on the other half, that's not a bad deal. It's even better if that is money that private industry would have never invested in said technology. And private industry is just as apt to chase bubbles leading to massive losses. When it becomes more profitable for private industry to invest in speculation in the short term a bubble occurs almost every time, followed by large economy damaging losses.
- ThomPete 9y ago
  Agree completely, however companies tend to have better feedback loops to point to lack of ROI.
  - AmIFirstToThink 9y ago
    Better or shorter? Must-solve, long shot things like GPS, Internet, Modern Weaponry require resolve behind it to make it happen. I am sure those programs had hundreds offshoots trying things out to solve problem, to see if it works, within the umbrella of that major effort e.g. GPS. ROI measured in terms of money results in drug companies chasing chronic pills than cures. That need not be the only measure.

otalp 9y ago

Interesting that he mentions Elon Musk when his companies are literally kept alive by billions in government subsidies and contracts. I don't like the binary view of "Give all power to corporations, with no government intervention" and "Let the state control all means of research and access" The ideal is clearly in between, where the state should break up monopolies and punish companies that have detrimental externalities to their functioning(like polluting the environment). That's not to dismiss government funded research either. We have Computers and The Internet in large part due to US Government research. Once an idea becomes marketable and profitable, private companies can swoop in, like Microsoft or Apple with Computers. But decades of unprofitable research is not feasible in a corporation. You would need the government to fund that.

subverter 9y ago
I get what you're saying. It's a common view that balances the two ends of the spectrum, as you point out. There was an article just a few days ago by Farhad Manjoo entitled Google, Not the Government, Is Building the Future (https://www.nytimes.com/2017/05/17/technology/personaltech/google-not-the-government-is-building-the-future.html https://www.nytimes.com/2017/05/17/technology/personaltech/g...) that I think captures your viewpoint well. I'd like to spend some time digesting it, after which I'll likely write some thoughts.
maxxxxx 9y ago
In the US it's not ok to discuss a balance between different approaches. Either private business/government is all good or it is all bad.
Robotbeat 9y ago
"Interesting that he mentions Elon Musk when his companies are literally kept alive by billions in government subsidies and contracts." Your point would be stronger without this falsehood. Both SpaceX and Tesla could do business without subsidies and government contracts. There were times during the worst parts of the Great Recession when this WAS true (and both businesses benefited from the technology and general environment enabled by government investment), but it's not "literally" true any longer that they're "kept alive" by government subsidies or contracts. Most of SpaceX's are non-US-govt satellites now, and SpaceX doesn't receive launch support subsidies like ULA. Tesla would still sell a lot of cars without the EV tax credit (which goes to the consumer, not Tesla, by the way... and is a bigger proportion of their competitors' car value than their own). Both companies would need to pull back growth without govt contracts and incentives, but to say they are today literally kept alive is blatantly false. And your false claim undermines your central point, actually. If innovative corporations need government subsidies indefinitely to literally stay alive, then government-funded innovation isn't competitive and all government is doing is propping up industries instead of making R&D investments that pay off in long-term growth.

stephen_g 9y ago

Classic Austrian economics. There's a clear misunderstanding throughout the whole article about how money works, which is typical of the entire school. This sentence is illuminating: "... monetary expansion, the latter of which causes prices to go up and the purchasing power of the dollars in my pocket to go down." That is not necessarily true, and in fact is often false. That is called the 'quantity theory of money', and for all its faults even mainstream economics doesn't buy into that anymore... It does appear intuitive - if there is more money in existence then existing money is worth less, right? There's even an identity that 'proves' this, PY = MV. Well, no. For price rises to be the case, the economy must be both at full capacity and full employment. It is also thinking about the problem statically, assuming that the amount of goods and services in the economy does not change to respond to an increase in demand. In the real world, economies actually have a lot more capacity to absorb extra money than people think (many people are spooked by cases like Zimbabwe and Venezuela, whose problems in reality were caused by completely different factors). And the Austrian mistake of assuming that monetary expansion == price inflation is dangerous, because if implemented the kind of policy leads to effectively controlling inflation by causing unemployment.

padobson 9y ago
>For price rises to be the case, the economy must be both at full capacity and full employment. Who's using intuition now? Stagflation in the 70's is a pretty jarring counter-example. We're living in an interesting economic time where Keynesian policies seem intuitively more effective than Austrian economics. Afterall, the Fed has been printing money like mad for the last 20 years, and there's no worrying inflation to be found. But there's an argument to be made that prices should be much lower than they are - that the scale of automation and globalization that we've seen has put enormous downward pressure on prices, and the currency devaluing effects of Fed monetary policy have put upwards pressure on prices without resultant inflation. So we can still afford a loaf of bread without having to push a wheelbarrow full of greenbacks up to the register, but the problem has manifested itself in different ways. Most obviously in the growing wealth gap, where those who are most capable of taking advantage of the Fed's cheap currency (the financial industry) have gotten all of the gains from automation and globalization, while the rest of us are stuck with a devalued currency.

frgtpsswrdlame 9y ago

>My point being, these examples show that, without market forces, the government has no indicator as to what’s worth allocating resources to and what’s not. This supposes that the only things worth allocating resources to are things which would be successful in the market place. He mentions public goods in this essay so I know that he's aware of them, why does he ignore their existence here? >Shifting focus from the public sector to the private, the idea that entrepreneurs and corporations are somehow worse at innovating, or don’t invest enough in R&D, is also called into question by many examples to the contrary. Like SpaceX, the aerospace company founded by Elon Musk with the goal of one day colonizing Mars,which recently accepted a $1 billion investment from Google and Fidelity. Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html http://www.latimes.com/business/la-fi-hy-musk-subsidies-2015... Hmm. He also presupposes that public R&D spending will drive out private R&D but that is actually an open economic question. (lots of studies showing them to be complements and lots showing them to be substitutes) This short survey demonstrates that existing empirical studies do not allow for a definitive conclusion regarding the sign of the relationships between publicly and privately funded R&D. Hence, it is still an open empirical question as to whether public R&D funding increases or decreases privately funded R&D. In order to answer this question, more research with more comprehensive datasets is needed. http://aei.pitt.edu/6736/1/1195_30.pdf http://aei.pitt.edu/6736/1/1195_30.pdf >As Ludwig von Mises so eloquently put it... Ah come on, I am so tired of libertarians whose entire economic education comes from reading other libertarian blogs online. Please quote some living economists, maybe even an economist who is still publishing papers. When will we realize this (specific) sort of libertarian for what they are, a utopian. The market can't solve every problem, that's why we have governments in the first place.

pvnick 9y ago

Henry Hazlitt, one of the economists quoted in the article, wrote a book called Economics in One Lesson [1]. It is a brilliant, and very approachable, piece of writing that should be read by everyone interested in the basics of economic theory. [1] https://www.amazon.com/Economics-One-Lesson-Shortest-Understand/dp/0517548232 https://www.amazon.com/Economics-One-Lesson-Shortest-Underst...

mcguire 9y ago

CompuServe called. This internet thing is a government boondoggle. They want their article back.

Quanttek 9y ago

Many already mentioned (at least partially) the fundamental flaws in the economic theory he bases his text on, and also his bad examples (completely ignoring you could provide as many counterexamples of staet-funded innovation and private sector waste) but I just want to emphasize his quotes: Being so obsessed with trying to point out logical fallacies, they don't provide any proof or actual arguments for their side. For example, the third quote literally provides zero evidence for the fact that the market's failures are primarily attributable to government intervention. Collective action theory alone points out how at least parts of the failures will be the market's.

throwaway47861 9y ago

> Other than Juicero and some sweeping statements about the technology, energy, and pharmaceutical industries benefitting from government research, Tarnoff offers little evidence to back up these claims. The "debunked" article is not scientific in 100% of the meaning of the word, that's a fact -- but if we go by the message of this "debunker" this means we must doubt every single deduction we make in our lives, on the grounds of what? Oh, none of us can't access all the information on the planet in real time. Legit as hell, lol. Let's face it, none of us is Skynet-like and yes we will always work with sparse data. Trying to make a good use of those is not a bug. It's a damn good feature. Far too often I am seeing a very perverse and backwards "arguing" on HN these days -- people grossly underestimate our innate human ability to draw rather good conclusions based on incomplete data, and constantly require "scientific proof" about pretty much anything. Science doesn't have data on most of what's happening on this planet however. And that won't change for a long time still. We make do with what we have. The rest are yelling "give me evidence!" in non-deterministic areas like country/world economics. Heh, OK.