3 ms·

I understand your argument, but at the same time I believe that in order to bring the "big stuff" to reality that truly impacts people lives, it requires heavy

by felipe 18y ago

I understand your argument, but at the same time I believe that in order to bring the "big stuff" to reality that truly impacts people lives, it requires heavy high-risk investment that only few organizations can absorb (normally governments). For example, the Wright Brothers succeeded because the military invested heavily in the first airplanes. Other examples are the Internet, the space program, cars (highway investment), commercial airlines, etc... A lot of the big stuff is initially subsidized with public money, and then thrown to the private sector.

cousin_it 18y ago
How about the previous generations of innovations? Railroads, electricity, telephones? I understand those were mostly industry-funded, not government-funded. For a modern day example, see mobile telephony.
- felipe 18y ago
  True, but in all those industries public money was heavily used to remove risk from the market, by either buying unproven technology (electricity, railroads) or by creating a "protected" (i. e.: regulated) space for private companies to operate. In mobile, take Nokia for example: Until the 80s Nokia's major activity was rubber-related products (seriously). That changed when they bought a state-owned telecom company, and that's when Nokia really focused on mobile telephony and made it popular. In other words, the government invested in the technology and removed the risk, enough so a private company could take it to the next level.
bokonist 18y ago
If government money is needed to produce something than it probably shouldn't be produced at all. Imagine a person living in a city row house. Perhaps this person would be willing to pay $1,000 a year extra to live in the suburbs. But the price of a car, gas, and tolls would add up to $1,500, so he decides at that price he'd rather spend his money on a yearly family vacation. Now government comes in, and taxes him $750 to pay for roads. Tolls are now nearly free compared to before. Thus moving to the suburbs now would only cost an extra $750. The $750 in taxes is a sunk cost that will be spent anyway. So under his calculations now, he decides that spending $750 to move the suburbs would make him happier than spending $1,500 on a vacation. Thus he moves. The government's tactics has made this person worse off. This person decided for himself that moving to the suburbs was not worth the expense - he'd rather spend his money in another way. But the government overrode his decision and forced him to spend a money in a way he did not original prefer. Typically, government spending is only justified for public goods - goods that benefit everyone but are non-excludable. Basic science falls into that category. But end products - such as planes, roads, space programs, etc., do not.

by felipe 18y ago

cousin_it 18y ago

How about the previous generations of innovations? Railroads, electricity, telephones? I understand those were mostly industry-funded, not government-funded. For a modern day example, see mobile telephony.

felipe 18y ago
True, but in all those industries public money was heavily used to remove risk from the market, by either buying unproven technology (electricity, railroads) or by creating a "protected" (i. e.: regulated) space for private companies to operate. In mobile, take Nokia for example: Until the 80s Nokia's major activity was rubber-related products (seriously). That changed when they bought a state-owned telecom company, and that's when Nokia really focused on mobile telephony and made it popular. In other words, the government invested in the technology and removed the risk, enough so a private company could take it to the next level.

bokonist 18y ago

If government money is needed to produce something than it probably shouldn't be produced at all. Imagine a person living in a city row house. Perhaps this person would be willing to pay $1,000 a year extra to live in the suburbs. But the price of a car, gas, and tolls would add up to $1,500, so he decides at that price he'd rather spend his money on a yearly family vacation. Now government comes in, and taxes him $750 to pay for roads. Tolls are now nearly free compared to before. Thus moving to the suburbs now would only cost an extra $750. The $750 in taxes is a sunk cost that will be spent anyway. So under his calculations now, he decides that spending $750 to move the suburbs would make him happier than spending $1,500 on a vacation. Thus he moves. The government's tactics has made this person worse off. This person decided for himself that moving to the suburbs was not worth the expense - he'd rather spend his money in another way. But the government overrode his decision and forced him to spend a money in a way he did not original prefer. Typically, government spending is only justified for public goods - goods that benefit everyone but are non-excludable. Basic science falls into that category. But end products - such as planes, roads, space programs, etc., do not.