population growth is not equal to labor force growth. Labor force participation in the US is 65% of the working age population.

In any case, considering how much of the "investing in the future" actually comes from the government, yes, public investment does create lasting jobs. And considering the current stimulus package emphasizes health and education spending above all, you can bet that it is investing in the future.

First, there is a difference between demand deposit accounts (checking/savings) and investments made by financial institutions. Not all the institution you list had the same problem, so I don't know what you want me to address. In some cases investment banks were highly leveraged using investors money seeking high returns using collateralize mortgage agreements. This almost had nothing to do with normal banking operations. With the housing bubble bursting the underlying value supporting these agreements made some of them worthless. On the other side of these transactions some made profits. The problem became liquidity in the system and that is what Congress tried to address. However, if the pain of re-valuing real-estate is going to be felt, you can delay it but you can not make it go away. The original TARP legislation was a joke in the fact that anyone thought it would have a real impact on liquidity in our banking system.
-----Added 3/2/2009 at 05 : 11 : 18-----
Good point. But, my point is that under normal economic conditions our economy creates jobs. If government takes credit for that, I think it is misleading at best.

Government is a net drag on any economy (Because if they take $1 from me to give to you, most likely you would get the benefit of less than $1 - they have to cover the cost of private drivers for senators and stuff like that). Sure we can have a population come to an agreement to invest in a interstate highway system that provides tremendous value to an economy but the fact is in order to build it and maintain it - it is all done with taxes taken from everyone or those who use it. The value did not come from government, the value came from people who paid for it.

-- except that some of those investors were banks who were involved in normal banking operations.

Yes I meant checking/savings. Considering the size of the bailout, I suspect most of the banks I listed were in serious trouble. Citi, by all rights, should be dead. BofA may have died, too. Still, even if those banks failed and the check/savings were paid by the FDIC, do you think that could have even slowed what we're heading into now? I'm not being facetious, btw.

The economy doesnt work like that. It is not a zero sum game (which is Keynes central insight, which is pretty much widely accepted today). The bail out last year prevented a much larger sum of assets from disappearing in thin air,as imperfect and flawed as it was. And there are several sectors where the government is significantly better at doing than the market, and often "government" and market are so intertwined as to be hard to separate.

It is really hard to have any investment in basic science, for example, without government intervention. Can't think of a single major innovation of the past 40 years that did not include heavy government investment.

Real assets don't disappear. Leverage against real assets can cause financial ruin. Given a decline in the value of underlying assets those highly leveraged became insolvent. De-leveraging the highly leveraged by government means rewarding the biggest risk takers and is still like a shell game because no matter how you look at it or what you do the market has to adjust to the new lower prices of the underlying assets and someone has to incur the costs. This is a painful process.


A very few areas, in my view, like providing for national defense is something government is better suited to provide .

When we look at innovation in the private sector compared to government there is no comparison. For example Cisco Systems invested $1.4 billion in R&D in the fourth quarter of 2008, if we added all the R&D investment by US corporations and compared it to Government spending on R&D we would find government R&D spending small in comparison. Then if we looked at the return on the dollars invested the difference would be even bigger. In most cases government is not even interested in their R&D investment translating to something useful to society.

Cisco would not even exist if it were not for basic research funded by DARPA and other organs of the Cold War state.

How do you know?

uh, ace---that's simply a historical fact. maybe in your platonic counter-universe forms exist eternally, nothing is created--rather there are only occasions that enable these forms to surface--but since that surfacing is inevitable, all occaisons are equivalent--so if it hadn't been via DARPA, it'd have been via some other medium. but that's metaphysics, not history. and i don't think you're consistent enough to be a platonist, so i think your position is just zany.

Well, Ace, had they had the resources and power of the state, I suppose they could have done it all themselves, but i think it's safe to say that Cisco depends on technology developed with funding from the Cold War state.

In fact, computers as we know them were developed with funding from the state. It's the same for networking and computer languages -- even the browser which allowed the commercialisation of computer networks was developed in a state-funded lab.

There is no comparison unless we actually, well, do the comparison. R&D spending in the US was mostly done by federal government, and only went below 50% after the 80s, but it is still around 40%, give or take a couple of percentage points

Government spending on R & D does not compete with private spending on R & D. In fact, most research find them to be complimentary, with increases in govt. R & D spending leading to increases in private R & D spending and no evidence of crowding out. Which is intuitive even, given that such investment is done at different stages of research.

With regards to returns, of course the difference would be bigger. Which is why we need public funding in the first place. Basic research, vaccines, treatment for certain diseases and so on generally require a significant investment with high risk, but needs to be done anyways. Virtually every household item, electronic item, or medical treatment only exists today because of massive spending on R&D by the government, usually investing in non profitable things like the space race, military innovations, and so on.

Using the logic here, we should give Adam and Eve (or the amoeba responsible for the evolution of man) the credit for all innovation.

I don't have the ability to say what might have been, the assumption that if not for government Cisco would not exist, is just that - an assumption, not a fact.
-----Added 5/2/2009 at 12 : 21 : 26-----
This game you want to play goes no where. O.k., what about electricity and the research that lead to our ability to harness it. That was not government, that was before any innovation in computer technology.

ace--do you know *anything* about the history of silicon valley?
it doesn't matter either way to me---it's more a question that will indicate the kind of conversation that's possible.
if you know anything about that history, the intertwining of defense department r & d money with the formation of the institutional infrastructure than enabled silicon valley to take shape is self-evident.
there's really no arguing about it, unless you want to leave reality entirely behind.

guyy's making the same point. dippin's making the same point.
you have no argument, ace.

Your view is a myth. Even when government gives funds for research it is often just a fraction of the actual cost of the research. I don't even know how to discuss this with you guys. Just look at any industry, any product, scientific knowledge and trace it to it source and its source of funding. Almost never, government.
-----Added 5/2/2009 at 12 : 27 : 50-----
No. I am a complete boob. I know nothing. I make it all up. I am always wrong. Is that the answer you seek.

That is a fallacy. The examples they gave were not of some obscure or far removed innovation.
-----Added 5/2/2009 at 12 : 33 : 35-----
You do know we are not talking about opinions, here, right? That the amount spent yearly on R&D has been actually accounted for for decades, right?

I am talking about yearly data and you are talking about myths?

And I find it funny that all discording opinions are myths when you've yet to provide either data or concrete examples.

I am going to assume there is simply a misunderstanding at this point, because I can not believe that there is any possibly way that we are suggesting that government is responsible for the products produced by a company like Cisco or the patents they hold. Why would the government allow Cisco to make billions in profits over the years on R&D done at the expense of tax payers? Why would the government allow a private company to file patents on intellectual property developed by the government? Either I mis-communicated my point or I am misreading the point you and others are making.

ace--you cannot be serious.

the arguments have been pretty straightforward---companies like cisco have assumed and benefitted from infrastructures that would not exist were it not for state funding.

if you want to make this over into a more general propostion, it'd be that neoliberals like yourself have no coherent sense of history, and so conflate the results of the past, of past actions--in this case of extensive and sustained state funding for mixed public/private sector research, the construction of institutional infrastructure, the fashioning of political power in ways that was able to sustain such funding and redirect it to other ends over time--neoliberals conflate the results of history with phenomena like rocks. neoliberals cannot address questions of infrastructure, public goods, or much of anything else coherently because they cannot deal with the past. they prefer to pretend it isn't a factor. and in the process, they simplify their way out of coherence.

I watched the video and it is interesting.

To be clear I agree a company like Cisco has benefited from government R&D and infrastructures put in place by government. However, taken as a whole innovation, even in Silicon Valley, has had more to do with private investment and innovators, than in government investments in R&D. After WWII, the government's initial $450 million investment in microwave/radio technology is significant if equated into today's dollars, however, like we know a company like Cisco is investing about $1.4 billion in R&D per quarter. If your argument is that because of a military need, government initiating investment in certain technologies means that the government is responsible for all R&D that stems from that initial investment - I can see how our views diverge. I used Cisco as an example because I was looking at their earnings today, however, if we look at all industry by category like, pharmaceuticals, consumer goods, automotive, energy, construction, agricultural, telecommunications, aeronautics, medical, etc., etc., etc., etc., government R&D is just a small drop in the bucket compared to what is going on in the private sector.

No internet based private venture would exist today w/o Al Gore's "invention of the internet".

What Gore in fact said and did was sponsor the legislation, the High Performance Computing Act, that created the National Research and Education Network with federal funding...which became the "information superhighway"...which became the backbone of today's internet.

In fact, the first browser, Mosaic, was funded by a federal grant under the HPCA to the Netscape guys who were at the Univ of Illinois at the time.

Government funding is at the foundation of most technology R&D, medical R&D, envrionmental/energy R&D, etc. It always has been, starting w/ the railroads and the industrial revolution. In fact, IBM credits in existence today to a heavy reliance on federal grants from its infancy in post WW II through the 80s.

Another fact, in the emerging area of biomedical science, the US has fallen behind the rest of the world (EU, Israel, India...) as a result of significant budget cuts to NIH over the last eight years.

Without a base (most often from government R&D funding), there is little private sector innovation or what innovation does emerge tends to crumble w/o that base.

I am not suggesting at any point that government funded R&D is necessarily superior to private investing. Nor am I suggesting that the private sector R&D is a rip off of government research. You see, it is not necessary to believe these things in order to see a place for government investment in R&D. All it takes for one to believe that federally funded R&D is important is to believe that it does not crowd out private investment and that it has some positive impact on our knowledge base. And in fact most research suggests that increases in govt. R&D spending actually leads to increases in private R&D.

Because the only way that federally funded R&D can be seen as a waste is if it crowds out similar private investment, but that is simply not the case, because federally funded R&D is often aimed at either military innovations, basic research or, when it is applied to final products aimed at civilians, it is usually medical research. The private sector often builds on these to produce specific consumer products, and as such it is just as important and not necessarily a "rip off" of government research.

Cisco started building multiple protocol routers. It was their unique innovation, but that was based on things that were created or improved through federally funded research.

So as you see, the position that federally funded R&D is useful is much easier to sustain than the position that government spending on R&D is useless.

That has never been my position. I just try to put government R&D investment into perspective. I am still amazed by what I think I am interpreting correctly, that many believe that just because government had some involvement that if not for that involvement there would have not been any growth or development in certain technologies, like the internet or "silicon valley" in general.

That's because you prefer ideological abstraction to history.