Home Economics At Least The Guardian Manages To Ask The Right Question This Time

At Least The Guardian Manages To Ask The Right Question This Time

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Sadly, being The Guardian, it manages to give the wrong answer to the right question but still, we should all be happy with advances in understanding and civilisation, however small they are.

The subject they want to discuss is state investment as opposed to private sector. They are, of course, on the side of there being more investment directed by pinheads in the civil service rather than by people who actually do things for a living. They also make a number of mistakes while doing so:

This is ideological. Mr Sunak will not invest on the scale that Britain desperately needs because it will risk his self-imposed borrowing limits. The Conservative manifesto in 2019 said that while the Treasury could borrow to invest, this could not exceed 3% of GDP on average. Mr Sunak’s splurge will come in under this rule. Given its historic levels of underinvestment, it is astonishing that the UK will invest less than the international average of 3.5%. Investment is crucial in any economic recovery from coronavirus and for dealing with the climate emergency.

The Guardian’s comeback there is not just ideological it is also begging the question. For the measure being used is of government investment, not total investment. So, their statement is that we must discuss whether or not government should invest by reference to the level by which other governments invest. Not, as might be more useful, look at the portion of investment which is done by government, which by private sector economic actors.

It’s also that usual silliness of looking at matters by how much we spend upon them – to concentrate upon inputs. What matters about matters is, of course, what we get out of them, what are the outputs? And, note well, if we start using the more efficient method – leave aside for a moment whether that’s public or private – then we need and even desire to invest less because we’re still getting that desired output by being more efficient about it.

But here’s the correct question at least:

In the UK, critics may claim that the state is bound to pick losers. The question is not whether the state picks losers, but whether government failure is better – or worse – than the market failure it seeks to correct.

In a country just starting HS2 the answer to that is what?

Quite. We’d be better off with Tina Green running the investment process, wouldn’t we?

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