Comments (37)

• adi

  Suppose that government decrees that only those who obtain driving license can drive on roads. Then it establishes an agency to sell these licenses. Because there is no alternatives people must legally buy licenses from monopoly state agency.

  But in system of national accounts this kind of activity is classified as sales of market products. So government is selling usefull services to customers. :)

  Published: June 12, 2007 7:19 AM

• Jonathan

  Maybe I misunderstand the word consumption but I cannot agree that all government expenditure is consumption.
  Poorly spent, misallocated etc.etc? Absolutely... but it's a strange kind of consumption that having been spent keeps on providing a service (think roads /train tracks etc).
  Secondly, and now I am being pedantic... I don't think it necessary and sufficient to say that government produces nothing ever. One can dream up silly scenarios where say a government built an asteroid detection/destruction device that the free market thought uneconomic because of the odds yet was fortuitously built just in time to destroy an actual asteroid. I am merely saying that is it logically sound to say that government always and everywhere produces nothing?
  I greatly respect the Austrian position against government but am unconvinced of the logic of the extremes.

  Published: June 12, 2007 9:08 AM

• Wladimir Kraus

  Jonathan:

  We can, of course, think of some projects that may turn out to be of some positive value. Your asteroid example may be actually quite good. But the important thing to understand here is that it's still consumption. Why would you think such a project would constitute production? What is your criterion of an activity being productive?

  What would government do without the actual producers, the miriad of business firms that ultimately provide the government with monetary and physical means to carry out such projects?

  The government is consumer regardless of how beneficial one or two of its projects might or might not (most likely the latter because of many reasons) turn out to be quite beneficial.

  Published: June 12, 2007 9:21 AM

• Rob

  There is never a return on capital invested for any government activity. That's all there is to it.

  Published: June 12, 2007 9:31 AM

• RogerM

  The closest the government gets to production in possibly road construction because improved transportation increases productivity in the transportation sector. But even there the gov allows bureaucratic principles to mess things up. Oklahoma is a good example. For over 40 years, highway 69 between Dallas and Tulsa has been the most heavily traveled road in the state, mainly because of truck traffic. So where did the state begin building four-lane highways? Everywhere but highway 69. The state finally got around to making highway 69 four-lane about 10 years ago. In the meantime, they built beautiful four-lane highways in remote areas that are mostly empty of traffic today.

  I agree that government spending is pure consumption and should not be included in the GDP.

  Published: June 12, 2007 9:41 AM

• RogerM

  adi: "So government is selling usefull services to customers."

  I guess you could look at it that way. Another way to look at it is that government consumes services for the benefit of the people where it is more efficient to do so. For example, the gov consumes the protective services of the armed forces so that each citizen doesn't have to consume them individually.

  In the US system of national accounts, sales of used products (houses and cars) are excluded from the GDP because they don't contribute any new production. But I would argue that sales of used products is a vital and valuable service to the economy, much more so than so-called government services.

  Published: June 12, 2007 9:48 AM

• Paul Marks

  First government distorts and then undermines the railroads (first with subsidies, then with the I.C.C., then with the "anti trust" attack on J.J. Hill) then the government provides a network of "free" roads (paid for by the taxpayer) which serve as a hidden subsidy for the auto producers.

  Also State and local governments undermine mass transit (trolly cars and so on) with price controls and other regulations - thus making it unprofitable (and leading to most of it being bought and closed down by auto companies).

  I have nothing against cars, but if roads are "economic investments" they would be commercially provided (they would not need money from taxation).

  As for free roads - if commercial developers or charitable trusts wish to provide these, fair enough. On issues such as road safety it is, of course, up to the owner of the road to decide who can use it (if they wish to have a policy that says, for example, "no drunks" that seems fair enough).

  On the protection from space rocks point:

  Many Hollywood films have been made on this very matter. Getting an international appeal going for a charitiable trust to provide such protection would be a logical next step.

  Published: June 12, 2007 10:30 AM

• N. Joseph Potts

  Government builds, say, bridges, to gain votes for whatever elected official(s) can claim credit for the building. This amounts to consumption by the end of the next election, or perhaps the politician's career (earlier than the time the bridge takes to wear out, one hopes).

  I find it most helpful to think of the more-general social/economic benefits of (government-funded) infrastructure as externalities to this process - which might be a fancy way of saying "coincidental," as has already been said.

  Published: June 12, 2007 11:15 AM

• billwald

  There is no such thing as "investment" because it is only another word for "delayed consumption." There are only immediate consumption and delayed consumption.

  Published: June 12, 2007 11:42 AM

• George Gaskell

  Jonathan,

  Government enterprises (i.e., government-built roads, government-run bus lines, the Post Office, schools, etc.) can only MIMIC productive commercial enterprises.

  All of the governmental enterprises started out as private commercial enterprises. Even armies. Once upon a time, even the minting of coins was once a private enterprise. This valuable metallurgical service was only later co-opted by the State.

  But all governmental enterprises cease to be a form of production once these activities are severed from income. No government can calculate how any particular activity produces income. Genuine businesses know how much every piece of equipment costs, and how much it contributes to revenue. But governments have no connection between expenditures and revenue. No matter how well-intentioned, they CANNOT calculate the profitability of any given employee, piece of equipment, business practice, etc. They have no means of doing so.

  Since they cannot engage in economic calculation, the best they can do is imitate businesses. At their inception, they can roughly approximate what a private business MIGHT have done. But as they get older, they tend to get further and further away from the way a real business would have operated. They make all of their economic decisions based on their own bureaucratic convenience, not the success of their ostensible purpose. This is why they are so inefficient and wasteful.

  To the extent that any governmental enterprise does anything remotely beneficial (i.e., by doing something that a profitable business would have done), it is only by accident.

  Published: June 12, 2007 1:08 PM

• Taylor

  Great article, Wlad.

  This is an important argument to make because many people give grudging respect to government for these public work projects, which they believe enrich a country and themselves. The reality is that these projects detract from capital accumulation because, as unproductive enterprises, they must be paid for out of previous productive surplus.

  I tried to cover this subject myself in response to a column in a recent issue of Forbes magazine: Building Bridges, Destroying the Economy

  Published: June 12, 2007 1:21 PM

• Francisco Torres

  There is no such thing as "investment" because it is only another word for "delayed consumption."

  That is not true. Investment implies applying something to obtain another. Delayed consumption does not imply this.

  Published: June 12, 2007 8:38 PM

• josh m

  Greetings, George Gaskell. I was interested in your thoughts on this earlier statement:

  "...say a government built an asteroid detection/destruction device that the free market thought uneconomic because of the odds yet was fortuitously built just in time to destroy an actual asteroid."

  Published: June 13, 2007 3:17 AM

• flix

  Say the government built a planet buster nuke or a genocidal plague virus that the free market thought uneconomic.
  Say the government decided to take millions of the most skilled, educated, economically productive people and extermiante them for political reasons.....

  
  I'll take my chances with rogue asteroids, thank you.

  Published: June 13, 2007 4:07 AM

• Jonathan

  To be clear I am only challenging the parts of this article which state all government expenditure is consumption, and that the government produces nothing ever.

  I am very Austrian minded and almost a libertarian so am only arguing from a theoretical point of view. i.e. responses above trying to convince me of the evils of government fall on glad ears but don't answer the objections I have to this article.

  Consumption as defined in the Oxford English Dictionary 'The action or fact of consuming or destroying; destruction' etc.etc. A government road/hospital will probably be run wastefully versus how it would have been run otherwise but to say that the expense has been total consumption is patently incorrect.
  I assume that some Austrians may redefine consumption (moving the goalposts) in such a manner to retro-fit an extreme conclusion (all governement spending is consumption) instead of the more reasonable conclusion that it is highly probable that it is wasteful therefore a worse option than solution provided by the market.

  Published: June 13, 2007 4:43 AM

• George Gaskell

  "...say a government built an asteroid detection/destruction device that the free market thought uneconomic because of the odds yet was fortuitously built just in time to destroy an actual asteroid."

  My thoughts? It's a ridiculous question. Name me one instance in which the most successful, hard-working, intelligent and productive people on earth were wrong about a planet-threatening issue when the government was right.

  (Please don't say "global warming." It's a load of crap.)

  I prefer to live in the real world. Do you honestly expect people to subscribe to a political philosophy that the most destructive, violent, murderous mode of organization ever developed by mankind (i.e., the State) is a good idea because of the fantasy that an asteroid MIGHT threaten the planet, AND that this fantasy scenario might happen at a time when every private individual, company and charitable foundation in the world just happens to conclude that it's not worth the effort to remedy?

  What makes you think that governments know what's best for us, but that people organized in private, voluntary ways are ignorant and careless? This view does not comport with reality.

  What if an asteroid threatened earth, and only government cared enough to stop it?

  I respond: What if cheesecake and onion rings made you skinny? What if sitting on the sofa all day made you rich? What if gravity worked backwards? What if supermodels thought that short, fat, lazy, slobs with bad breath, no money, no prospects and abrasive personalities were irresistible?

  The question makes no sense.

  Published: June 13, 2007 9:25 AM

• George Gaskell

  I assume that some Austrians may redefine consumption (moving the goalposts) in such a manner to retro-fit an extreme conclusion (all governement spending is consumption) instead of the more reasonable conclusion that it is highly probable that it is wasteful therefore a worse option than solution provided by the market.

  No, Jonathan, it's both consumption AND it's wasteful.

  Production is spending money to make money (or, at least, spending money with the INTENT of getting money back).

  Consumption is everything else -- spending money without the intent of getting more money back.

  For example, I placed a great deal of economic value on the fillet with Bearnaise sauce that I ate a couple of nights ago. I do not consider it to have been wasteful for me to buy and eat it. But buying it was still consumption. But eating it was not productive economic activity because the act of buying and eating it generated no return on what I spent on it.

  The State is a consumer because does not make money on its production. Its production is not connected to its revenue. It gets its revenue from taxes. It does not produce a thing, and then receive money directly from the social, economic value of that thing. That is why government spending is consumption.

  This is ALSO the underlying reason that a State's consumption is wasteful. Businesses are able to reduce waste because they are FORCED to produce things that generate income. Their whole reason for existing is to find modes of production that generate returns. Every decision they make, from what to produce to how to go about producing it, is driven by this overriding concern -- how will doing X generate a return?

  In contrast, the State exists for the express purpose of engaging in activities that generate no return, or an insufficient return. If doing these things (and doing them in the way the government does them) generated profits, then private individuals and companies would already be doing it. The State exists in order to engage in unprofitable, consumptive activities.

  Published: June 13, 2007 9:40 AM

• Jonathan

  George, I presume you are responding to my post?
  If so, you are putting words into my mouth and answering questions I did not ask.
  e.g note the elephant of a difference between "...say a government built an asteroid detection/destruction device that the free market thought uneconomic because of the odds yet was fortuitously built just in time to destroy an actual asteroid."
  and "What if an asteroid threatened earth, and only government cared enough to stop it? "
  And no, I am not asking people to subscribe to government, please note the 'I am very Austrian minded and almost a libertarian so am only arguing from a theoretical point of view' in my previous post.
  As for the 'What if cheesecake and onion rings made you skinny?' I respond ' What if people posted aggressive responses to posts they didnt read/understand'
  

  Published: June 13, 2007 9:44 AM

• josh m

  Jonathan, I'm the one who asked George to respond to your asteroid buster expample. I thought you may have come up with an example where state action provides more utility than voluntary action (if such a thing were logically possible).

  
  

  Published: June 13, 2007 11:55 AM

• George Gaskell

  Aggressive?

  For someone who professes to be so sensitive to the true meaning of words, you are awfully sloppy in your use of words like "aggressive." If you thought a joke about cheesecake and onion rings was aggressive, then I suspect that you don't what real aggression is.

  As for your question, in your hypothetical scenario, it appears that you were trying to focus on the idea that an asteroid causing harm goes against extremely long odds, and you were asking if the government's creation of the space device would be considered "productive" if, by an unpredicted happy chance, it happened to save everyone's lives.

  No, that's not production. That's an accident. It's accidentally beneficial, of course, but the production of the space device was not made with the reasonable expectation that it generate a return on its investment.

  (This is what I meant when I said: To the extent that any governmental enterprise does anything remotely beneficial (i.e., by doing something that a profitable business would have done), it is only by accident.)

  Before the asteroid became known as an actual, realistic threat, the production of a space device was uneconomical. At that time, for all anyone knew, it was a total waste of time.

  Building an asteroid interceptor is like a guy who builds a rocket ship that is specially designed to capture giant pterodactyls, on the off chance that a giant pterodactyl might show up one day.

  Now, if a giant pterodactyl does, in fact, show up, the guy who built the rocket ship is going to be very popular. But until that day, his activities are not economically efficient.

  Nor is building a pterodactyl-catching rocket ship a form of production, because no one could build a pterodactyl-catching rocket ship with the expectation that it would generate a return on the investment. No one buys such things. There is no market for them.

  If you are willing to address the main point, I might be reassured that you are interested in discussing the matter further. The main point, in case you missed it, is that genuinely productive economic activity must include a nexus between the resources expended on the activity and the expected return of income.

  (By the way, the asteroid phenomenon you are talking about is called a "black swan" -- an event that is both (a) rare to the point of being functionally unpredictable, and (b) has a high impact. The market has a way of dealing with such things. It's called "insurance.")

  Published: June 13, 2007 12:42 PM

• roastbird

  An interesting piece of logic, but...

  If we define consumption as an act that, when compared to the next best alternatives, does not increase the production of any other useful good now or in the future, then there are many public services (services with positive externalities) that will be under produced.

  The definition above is merely a paraphrasing of this section of the original article.
  "From the point of view of an individual consumer, once money has been spent on consumers' goods, he must find ways to obtain fresh funds in order to be able to consume in the future. That the money is spent and gone is most clearly present in the fact that an act of consumption does not provide any means, either physical or monetary, to obtain goods next time. It is literally an act of destruction of the goods which had been previously produced. "

  On the topic of building roads, I believe it is an obvious fact that a country with roads will be more productive than a country without roads. Building roads is not an act of pure consumption.

  If a government decides to build roads, and roads are a kind of investment, then the evaluation should lie between whether having a government build roads will result in more social welfare, or whether a free market (or some other) mechanism of allocating resources to building roads will result in more social welfare.

  From the above premises, the conclusion of the article implies that the allocation of resources for investment goods with significant positive externalities is better done by a market mechanism (or alternative mechanism) than the government.

  Firstly, the premises contradicts many statements in the original article, an example being

  "For example, a laundry service and a housewife both use washing machines. Both parties make dirty clothes clean again, i.e., they both "produce" clean clothes. In both cases the washing machines undergo wear and tear and natural deterioration. Yet, despite all their similarities concerning the physical aspects of cleaning, they represent two fundamentally different activities in respect to their economic significance.

  In the first case, the housewife does not receive for her domestic "services" any payment that she can use to purchase a new washing machine once the old one wears out. She must turn to other sources in order to receive the necessary funds to buy a new machine. On the other hand, the laundromat receives payments precisely for the cleaning services it provides. The revenue thus received can be used to replace the washing machines it operates. The actual utility derived from home-cleaned clothes might indeed be very high; the clothes might be cleaner and smell better if a housewife does the laundry, but this fact is entirely irrelevant with respect to the nature of economic relationships within the division-of-labor economy." - without clean clothes, a person will experience a higher likelyhood of falling sick, reducing his ability to produce. (clean clothes also serve many other investment functions, like less irritating and distraction when working, etc.)

  Secondly, the original article asserts that the government does not invest because government resource allocation cannot be evaluated by methods of estimating the monetary returns that is the current few centuries' trend of private business decsion making. This is an interesting assertion, but not one that I would accept without more in depth arguments. Externalities is often cited as a reason for why governments can reach a more optimal allocation of resources than private businesses can. For this assertion to be accepted, there should be an explanation as to why our contemporary economic concepts of externalities and individual profit maximisation behavior no longer applies.

  Published: June 14, 2007 5:50 AM

• Miklos Hollender

  Very interesting article, but I think some practical examples or models would be useful for determining it's validity.

  Let's say there is a construction company with a yearly sales of $100M and 10% profits, $10M a year. Let's assume first, that none of this profit is consumed but all of it is reinvested. Thus the total investment is $10M. Also note that both the costs incurred by the operation of the company ($90M) and the $10M savings are demand - demand for labour or demand from products of third parties. Thus the total demand generated by the company equals it's total sales. Also note that it would be the same if the owners would decide to consume their $10M profit.

  Not let's assume that the goverment taxes away 25% of this profit, 2.5M. Let's also assume they don't spend it on the salaries of the bureaucrats and things like that, but they spend it on necessary construction works of a local public school - and to keep our model simple, lets' say that the company doing the job is this very company. So basically they get back that $2.5M that was taxed away from them. Now, 90% of this sale is cost again, going to the labour and to third parties, which is $2.25M. Profits is $0.25M and while 25% of it will be taxed again, let's exclude that from our model because it's a very small amount. How does the total picture look like?

  The original, non-taxed model was $100M sales, $90M costs, $10M profits of which is all reinvested.

  In the taxed model, total sales is $102.5M, $92.25M costs, profits is $7.75M which is all reinvested. Thus in this model the investment is reduced by the total COGS of the products and services the goverment purchases. We can say that the reinvestment of the company reduced by the extra COGS forced upon them by the goverment. But of course, that COGS is an input for somebody who will make profit on it, which will partly be taxed away, partly saved etc... so the picture is not as bad as it seems, but it's clear that the effect is the reduction of investment, IF we assume all profits are reinvested.

  Of course, the model is flawed, because we assumed that the company owners reinvest all of their profits. Now, the big question is: if they consume part of it and reinvest part of it, will the tax reduce the investment or reduce the consumption? This is a very good question and rather a psychological than an economical one. I can't answer that question but I have a real-life example at hand - my father, who happens to be a construction entrepreneur. He gives himself a fixed monthly salary for his managerial work, and the rest of the profit is always reinvested. The philosophy behind this way of thinking is that he considers his company not as a renewable part of his personal wealth, but rather as an organization which has an identity, a personality of its own. Thus if the company produces more value than his self-decided managerial salary is then that he does not considers his propert, that belongs to the company itself. But this also means that if taxes rise, that's the company's problem, not his, he won't reduce his consumption, but rather ther reinvestment. I'm not sure though whether this way of thinking is common or not.

  Published: June 14, 2007 6:25 AM

• George Gaskell

  the original article asserts that the government does not invest because government resource allocation cannot be evaluated by methods of estimating the monetary returns that is the current few centuries' trend of private business decsion making. This is an interesting assertion, but not one that I would accept without more in depth arguments.

  It's called the calculation problem, and it permeates everything that Mises wrote.

  Please read this book, when you have finished, please tell us what you think about it as a more in-depth argument.

  See also here.

  
  I believe it is an obvious fact that a country with roads will be more productive than a country without roads. Building roads is not an act of pure consumption.

  Neither you nor anyone else has a way of calculating the true costs or benefits of positive or negative externalities (or anything else) without prices in a private market.

  The only way that anyone can know that a country with roads is more productive is that, in the absence of government intervention, people still build roads. (Incidentally, they also still build schools, coin money, farm crops, mail letters, etc.)

  Also, the question is not between roads and the total absence of roads. It is whether placing one road here or another there is better or worse. Or should there be two instead of one? Or 10 instead of 12? Or freeways instead of surface roads? Four lanes or two? How much should it cost to install and maintain them?

  The ONLY way to answer any of these questions is economic calculation -- compare the cost to the benefit. But when a government does it, there is no connection between the spending of money and the receiving of money. There is NO WAY TO KNOW if, or by how much, any particular decision has been a gain or a loss.

  Published: June 14, 2007 9:32 AM

• George Gaskell

  Not let's assume that the goverment taxes away 25% of this profit, 2.5M. Let's also assume they don't spend it on the salaries of the bureaucrats and things like that, but they spend it on necessary construction works of a local public school.

  How do you know that the construction of the local public school is necessary? What is the economic analysis that leads you to this conclusion? On what basis do you (or anyone) determine that spending the money on that government project (or any other) actually leads to a net economic gain?

  How much is too much to spend on construction? How much is too little? How do you answer, by reference to economic analysis, any of the millions of economic decisions that need to be answered before you can build it, much less answer the millions of economic decisions needed to operate it?

  Published: June 14, 2007 9:40 AM

• V Harris

  Wladimir, your position seems artificially constrained by its definitions. As one example, money is simply a medium of exchange for things of ‘value.' Yet your position seems to be that any good or service that is not explicitly accounted for in terms of money cannot be valuated -- and so its value cannot be considered in any economic calculation. While this assumption might be useful for macro-discussion purposes to outside observers of the firm, it does little to explain the true nature of why goods and services are micro-exchanged. Thus, as others have here pointed out, your analysis of government activity as always ‘consumptive' is derived by definition, and not by practice.
  To illustrate the difficulties such artificial constraints create, let's approach the production/consumption issue from the other direction -- private (productive) activity transferred to public (consumptive) activity. Suppose we have a private firm which owns and operates a profitable private toll road. The firm has purchased all the necessary rights-of-way to expand the high-demand road. But before expansion, the state government and the firm voluntarily reach agreement that the state will buy the road and associated rights-of-way. Under the terms in your paper, while the firm could have engaged in ‘productive' activity in expanding and operating the road, once ownership is transferred to the state, government could only ‘consumptively' expand and operate that same road. Either the firm or the state would have monopoly control over the road. Either could set exactly the same fees to optimize revenue while controlling demand. Either could retain and ‘invest' or distribute exactly the same ‘profits.'
  On the micro-level, if the firm or the state operate exactly the same project in exactly the same manner, it is then only our artificial constraints which define the project as productive when owned by the firm and consumptive when owned by the state. I think the same case can also be made when evaluating government productivity on a macro level — but for different reasons.
  I'll be anxious to read your response. V Harris

  Published: June 14, 2007 11:13 AM

• V Harris

  George, is it your position that if the productivity of an activity is not measured, or cannot be measured, that such an activity is not productive?

  Further, is it your position that government projects can start out as productive but devolve to consumptive, or is it that government projects can simply 'never' be productive?

  Published: June 14, 2007 11:41 AM

• Wladimir Kraus

  V Harris:

  My position is not, contrary to what you think, that "any good or service that is not explicitly accounted for in terms of money cannot be valuated -- and so its value cannot be considered in any economic calculation." I use the criterion of the purpose of bringing in or helping to bring in money revenue to distinguish between productive and consumptive activity/productive. If the activity is carried out with this purpose then it is to be considered as productive.

  I believe this criterion is appropriate if you want to understand how the division-of-labor economic system is organized. I don't see why should be artificial. Please consult chapter 11 of Prof. Reisman that I referred to in the footnote [5] of the article. The chapter introduces the criterion and discusses many possible objections.

  Published: June 14, 2007 11:54 AM

• Clayton

  I don't think I'm gonna stick around to debate this to its end, but there's certainly points here that that are right and the idea that the government produces nothing strikes me as one of the inaccurate ones.
  

  I think the easiest example is fire departments. How many fire departments would it take to have a "competitive price" at your home... my guess is 3 is a reasonable estimate. Consequently, if a government can perform this service, it can generate up to 200% overhead/inefficiency compared to the free market and produce better outcomes.
  

  This is certainly the conversion of labor into a service. So either the government is a consumer of labor (like a factory owned by the end customer might strictly be considered a consumer of raw materials)... ok that's a tough angle for me. But, and I think the more essential point here, the government does *add value* through its management of the process... potentially even versus the free market "producers".
  

  How this is implicitly consumption... I can't really follow. It just seems like you're using the argument strictly to posture philosophical positions.
  

  ===
  

  Another important consideration here addressing the initial Keynesian concept (and appears to have been mentioned several times in the debate):
  

  If we were rational, we would consider a debt of the government a debt of our own. Sooner or later, we have to pay the interest or principle using our taxes (paying for it) or by reducing the services we receive (giving up "paid for" value). Consequently, each tax payer should take it out of their own wealth and act accordingly.
  

  This is not what happens. Consequently it creates a strange economic implication:
  

  -If the government taxes and spends, the wealth of the people are exactly reduced by the incremental spending. In fairness to Austrian theories and libertarians in general, there is likely to be inefficiency and misallocation due to poor government decision making. However, we can think of the actual government activities like the management overhead invested in a company's capital. It must be either be expensed (consumed) or capitalized to make sense. Businesses do this all the time and we don't think it strange.
  

  -If the government borrows to spend, it creates demand for services while convincing "the people" that they are weathier than they really are. Consequently, they are disillusioned into believing that the money given to the government is somehow "invested." The services *may* create more value than they cost so this isn't necessarily inefficient. However, it does change the consumer behavior as they will now consume a larger share of their "wealth". In a comparable business world, this is like capitalizing costs that we should be expensing. The value is lost, not to be recovered in the future by the sale of the product. Consequently we are not as rich (or our company is not worth as much) as we might otherwise think.
  

  The example may not be well worded, but I think it's very much to the point.

  Published: June 14, 2007 7:49 PM

• Philemon

  Believe it or not: Did you know? 100 pennies are now worth more than a dollar bill. And twenty nickels are worth even more than that.

  Published: June 14, 2007 8:28 PM

• George Gaskell

  In fairness to Austrian theories and libertarians in general, there is likely to be inefficiency and misallocation due to poor government decision making.

  If you understood the calculation problem (what I call the Misesian Calculation Impossibility Principle, you would see that misallocation and inefficiency are not merely likely, but absolutely inevitable.

  Published: June 14, 2007 9:25 PM

• George Gaskell

  George, is it your position that if the productivity of an activity is not measured, or cannot be measured, that such an activity is not productive?

  My position is that these two features -- (a) the impossibility of State enterprises constituting a form of production, and (b) the inability of government to measure costs and benefits -- are both the result of a common cause: the fact that government severs the connection between its revenue and its expenditures.

  It's like a trust fund brat who pretends to operate a business -- like a "wine consultant," or a "polo promoter." It isn't profitable in any real sense. The brat doesn't depend on it to survive economically. It isn't organized in a way to really succeed as a business. Even though he calls it a "business," it is really just a hobby. All this enterprise does is spend money. Even if this business happens to make a buck here or there, it's just an accident. His real source of income (the trust fund) is not produced by the "business" expenditures. Any income that the "business" occasionally makes is really just a way of making the hobby a slightly less expensive form of consumption than it otherwise would be.

  Published: June 14, 2007 9:36 PM

• Peter

  How many fire departments would it take to have a "competitive price" at your home...

  One.

  The notion of a "competitive price" has nothing to do with the number of fire departments; only with the restrictions imposed around them.

  Published: June 14, 2007 11:34 PM

• Bill Ross

  This is proven more simply and decisively in "Mathematics of Rule"

  http://www.nazisociopaths.org/modules/article/view.article.php/c1/32

  Bill Ross
  (Electronics Design Engineer)

  Published: June 16, 2007 1:48 PM

• David K. Meller

  I think that a better and more accurate title would have been, "Government Produces nothing Useful". Governments (and their allied corporations) unfortunately produce many bad, useless, and destructive goods and services foisted unwillingly upon the rest of us that nobody wants or could have any use for. A few examples follow below:

  Government produces more than enough regulations, laws, (and lawsuits, most of a frivolous and irresponsible nature), paperwork, jails and prisons (incarcerating mostly nonviolent offenders, some of whom haven't even been convicted of any crime).

  Government also produces, in copious quantities, heavily politicized, deceptive, and badly researched studies, expressing their sundry lies told to the rest of us from the "safety and efficacy" of poisonous pharmaceuticals (FDA approved, of course) to nonsense like "global warming, the virtues of racial and gender "equality" and the resulting compulsory "diversity", jsutifying "recycling" for a "sustainable environment", and protecting us from "terror" among other things.

  Government also produces endless unwanted hectoring, nagging and pestering the rest of us by their churning out so-called "public service advertisements". Said advertising emits messages which nobody wants to hear or would have any use for, but is so ubiqitous that one can hardlly avoid it.

  Gpvernment also is most assiduous in their "producing" their taxes and inflation, greatly increasing the amount and variety of theft and extortion in the larger society which the rest of us have to pay for and live with!

  Governments ( and ONLY governments) also produce endless, pointless, and ongoing wars (to end wars, to make ______ safe for democrazy, to fight "terror", to fight "drugs", to fight "racism". The government never knows what to do even if thery were to win, and the destruction to civil society, to our economy, and to every decent person's quality of life is enormous and irreparable!

  Government produces nothing worthwhile. But it indeed produces noisome, impoverishing, and pestiferous nagging, threats, and invasive misbehavior against the rest of us which would be tolerated nowhere else!

  Governments produce nothing? Hardly. Governments produce nothing good? Absolutely!!

  PEACE AND FREEDOM!!
  David K. Meller

  Published: June 17, 2007 12:40 PM

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  Government produces more than enough regulations, laws, (and lawsuits, most of a frivolous and irresponsible nature), paperwork, jails and prisons (incarcerating mostly nonviolent offenders, some of whom haven't even been convicted of any crime).?? Lol~~

  Published: June 17, 2007 7:41 PM

• Anthony

  Indeed, I'd rather side with Hoppe on this - governments produce something - bads!

  Published: June 18, 2007 12:53 PM

• josh m

  George Gaskell, this passage from from Hazlitt's One Lesson (pp. 20-21) has stuck with me and I'm curious what your thoughts are on it, (particularly the last sentence):

  “A certain amount of public spending is necessary to perform essential government functions. A certain amount of public works—of streets and roads and bridges and tunnels, of armories and navy yards, of buildings to house legislatures, police and fire departments—is necessary to
  supply essential public services. With such public works, necessary for their own sake, and defended on that ground alone, I am not here concerned…

  “A bridge is built. If it is built to meet an insistent public demand, if it solves a traffic problem or a transportation problem otherwise insoluble, if, in short, it is even more
  necessary than the things for which the taxpayers would have spent their money if it had not been taxed away from them, there can be no objection.”
  

  Published: June 22, 2007 3:12 AM