4 ms·

As long as you get local firms, local people and local resources to build your new railway it doesn’t matter what it costs. It’s net free too the country. Look

As long as you get local firms, local people and local resources to build your new railway it doesn’t matter what it costs. It’s net free too the country. Look at the massive high speed rail network China has built in the last decade. Yet politicians will outsource such projects to other countries to “save costs”.

benj111 7y ago
What are the opportunity costs though? At the extreme you could have 100% of your citizenry building houses, you can't then grow food, or build cars, etc, etc. Second, unless your economy is completely cut off from the outside world you're going to get leakage away. The builder you're paying to build houses is eventually going to want to show off his wealth by buying an iphone, or some champagne, or a Ferrari. To look at a more practical example lets look at the wood industry, and lets say that Australia's wood industry is already large enough to actually absorb this increase. The wood industry has the option of selling around the world, but this development has to buy from you. So you can sell them all the rubbish stuff that can't be sold internationally. So what then? The government doesn't want shoddy Australian houses being built so restricts exports of wood. But now the supply of wood products doesn't really match the supply and you've got teak being made into OSB, and your houses are made with high quality Australian wood, but your wood industry has gone down the toilet because the prices paid for OSB are nowhere near the prices paid for solid lumps of teak. Trade is good. It makes everyone on balance better off, what you propose is cutting off trade from the rest of the world, it's never going to end well.
roenxi 7y ago
It isn't net-free; as a sibling comment mentions there are opportunity costs. In this instance, the opportunity costs are the driver for the decision - in the micro, it is obviously a big win to swap 100 man-hours worth of Australian input for work by a foreign firm that can be paid for with 80 man-hours of Australian input. We'd get the same amount of stuff with less effort. It is a different kettle of fish if you want to run it as a low cost welfare operation or as a long term strategic skill building exercise. It'd probably make a pretty good welfare operation - soak up a bunch of labour and get them doing something useful but not necessarily of high marginal benefit. We'd still expect it to be a net loss if there was something that the people involved could have done that was not government sponsored, but the economy is looking shaky at the moment so it might be a good idea. This makes sense if in the prior example there is no 80-hours-of-work opportunity/20 leisure option - if you have no opportunities there is no cost. I don't know if train track construction is a useful long term strategic skill for somewhere like Australia. We'd probably get a lot more out of investing in chemistry and biotech rather than beefing up on people who lay down track.
barrkel 7y ago
That's economically illiterate. Look at gains from trade and comparative advantage.

benj111 7y ago

What are the opportunity costs though? At the extreme you could have 100% of your citizenry building houses, you can't then grow food, or build cars, etc, etc. Second, unless your economy is completely cut off from the outside world you're going to get leakage away. The builder you're paying to build houses is eventually going to want to show off his wealth by buying an iphone, or some champagne, or a Ferrari. To look at a more practical example lets look at the wood industry, and lets say that Australia's wood industry is already large enough to actually absorb this increase. The wood industry has the option of selling around the world, but this development has to buy from you. So you can sell them all the rubbish stuff that can't be sold internationally. So what then? The government doesn't want shoddy Australian houses being built so restricts exports of wood. But now the supply of wood products doesn't really match the supply and you've got teak being made into OSB, and your houses are made with high quality Australian wood, but your wood industry has gone down the toilet because the prices paid for OSB are nowhere near the prices paid for solid lumps of teak. Trade is good. It makes everyone on balance better off, what you propose is cutting off trade from the rest of the world, it's never going to end well.

roenxi 7y ago

It isn't net-free; as a sibling comment mentions there are opportunity costs. In this instance, the opportunity costs are the driver for the decision - in the micro, it is obviously a big win to swap 100 man-hours worth of Australian input for work by a foreign firm that can be paid for with 80 man-hours of Australian input. We'd get the same amount of stuff with less effort. It is a different kettle of fish if you want to run it as a low cost welfare operation or as a long term strategic skill building exercise. It'd probably make a pretty good welfare operation - soak up a bunch of labour and get them doing something useful but not necessarily of high marginal benefit. We'd still expect it to be a net loss if there was something that the people involved could have done that was not government sponsored, but the economy is looking shaky at the moment so it might be a good idea. This makes sense if in the prior example there is no 80-hours-of-work opportunity/20 leisure option - if you have no opportunities there is no cost. I don't know if train track construction is a useful long term strategic skill for somewhere like Australia. We'd probably get a lot more out of investing in chemistry and biotech rather than beefing up on people who lay down track.

barrkel 7y ago

That's economically illiterate. Look at gains from trade and comparative advantage.