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That which is seen versus that which is not seen

I am not much impressed with Roger Bootle’s drearily conventional arguments for what the UK economy needs.

“I have banged on before about decisions on key projects which have large public sector involvement but which may also hold the key to major private sector spending, e.g. over London’s airport capacity.”

Preposterous Keynesian fallacy at work. It presupposes that money allocated to some project via the political process is more likely to create a ‘multiplier’ than market driven uses of that money… and it assumes that the money taken by the state by force would not have been invested in something more worthwhile in aggregate if the decisions were left to its original owners before it was confiscated by the state.

But of course as it is easier to see something like an airport rather than the myriad of other uses the money would have gone to had it not been forced into that project, so somehow the big flashy ‘infrastructure’ protect is claimed to have driven knock-on investment and is therefore an obvious Good Thing. As Bastiat put it “That which is seen versus that which is not seen”.

Ain’t necessarily so and given the record of government decision making versus the more diffused decision making of markets, usually ain’t so.

33 comments to That which is seen versus that which is not seen

  • Paul Marks

    We have since this “infrastucture” stuff in London – for example “Cross Rail” which has turned much of London into a building site, and DESTROYED many business enterprises (all at vast expense).

    But Mr Bootle wants even more money. But if an extra airport (or whatver) is such a good “investment” why are not private investors (especially with all this”cheap money”, credit bubble, from the Bank of England in the banks) buying the land at FREE MARKET PRICES and building upon it at their own expense?

    No Mr Bootle – wants more CORPORATE WELFARE.

    Let me guess – does this man work for the Financial Times newspaper or the Economist magazine?

  • A very quick google reveals all:

    Roger Bootle is an economist and a weekly columnist for the Daily Telegraph. He is currently the Managing Director of Capital Economics, an independent macroeconomic research consultancy

  • Bruce Hoult

    I suspect that airports can be quite good investments for private capital, though land costs will tend to put them well out of the city.

    The reason airports are usually done by government is probably that it is far easier for government to get planning permission.

    Most airports are highly wasteful of land, often occupying a large square with only a couple of narrow runways with huge empty spaces around them.

    The airport here in Wellington occupies 110 hectare (270 acres) while handling over 100,000 aircraft movements and 5m passengers a year.

    In comparison, the railway station (NZ’s busiest) handles 8m much lower valued passengers a year, using a similar amount of land.

    LHR is 12 times the area of WLG, for 4.7 times as many aircraft movements and 14 times more passengers (the average plane is much bigger than Wellington’s turboprops and B737/A320s).

    LAX is 14 times the area of Wellington for 6 times the aircraft movements and 12 times the number of passengers.

    So, actually, the passenger density per area is approximately the same for all three of those airports, though LHR is a bit better than LAX.

    Would be interesting to learn of any airports that are vastly different from 50k pax/ha/yr.

  • Paul Marks

    Many thanks Simon.

    No wonder Detlev Schlichter does not like the Daily Telegraph.

    I am ignorant of it – having concelled my subscription some years ago.

  • Steven

    Most airports are highly wasteful of land, often occupying a large square with only a couple of narrow runways with huge empty spaces around them.

    That’s because planes crash from time to time. All that open area around runways means the crashing plane is less likely to take out a neighborhood when it does crash when the only thing around the runway is vast tracts of nothing. It’s also why major airports tended to be outside of town and the problems arose when the suburbs began approaching the airport.

  • RRS

    But, no one is asking, what will be the “productive” use of each bit of additional or replacement “infrastructure.”

    Is it a case of “Build it and it will be used?”

    Used to what ends?

  • Midwesterner

    Bruce, I suspect there is a very strong element of ‘stadium complex’ to airport construction. “If we build it, they will come.” It is often just another facet of empire building. (before I hit ‘post’ I checked the thread and see RRS make the same approximate point)

    Unrelated, some years back (IIRC) our regional airport, being in a more or less agricultural area between two cities, rented out the land between runways, taxiways and low elevation approaches for farming. I think the farming operations effectively came under tower control.

  • Bruce Hoult

    Not a lot of planes crash *at* the airport, and those that do tend to stay on the runway or at least in line with it, not in a random place to the side, so I can’t see a large empty square as being much of an advantage relative to other uses the land could be put to.

    Midwesterner, I’m sure there are some white elephant airports around, next to minor cities, with next to no traffic compared to their size or cost. Ely, NV comes to mind. None of the ones I mentioned come into this category. I’m sure any new airport built in the vicinity of London would be heavily used.

    If government is going to spend money on infrastructure I’d far rather they built a few 3 km long runways than hundreds or thousands of km of high speed railway line.

    Even a humble 50 seat Q300 (DH Dash 8) that needs a mere 1200m of runway goes 50% faster than any train ever made, and has infinite flexibility of route to go to any other 1200m of runway within 1500 km. WIth cheaper ticket prices too.

  • George Mulberry

    Maybe I’m reading it differently, but it doesn’t look to me like he is calling for state investment in infrastruture, but for the politicans to make a decision regarding airport location (which the private sector will the fund) instead of them keep kicking the can down the road.

  • RRS

    . . . it assumes that the money taken by the state by force would not have been invested in something more worthwhile in aggregate if the decisions were left to its original owners before it was confiscated by the state

    Therein is nested a major issue of our times and one that has given some pressure to acceptance of the use of the mechanisms of government for the redeployment of capital that is otherwise sequestered.

    So that I am not misunderstood, I not only do not favor, but oppose such use of the mechanisms of government. I am simply observing factors in the economic structures of the “developed” economies and the impact of Managerial Capitalism.

    The accrued surpluses (profits) which constitute the capital available for redeployment (including that capital which supports “created credits”) are largely sequestered in business enterprises, particularly those of large-scale. The “original owners” are the beneficial owners, who by virtue of the fragmented nature of their ownerships do not control the use and redeployment of those surpluses. That control falls under the aegis of the layers of the managerial class which has its own distinct motivations exhibited in the exercise of that control.

    This is not of recent development. It’s structures in American corporations was noted as far back as 1932 by Berle& Means; defined extensively by Walter Lippmann in “The Good Society,” which was the subject of a Paris colloquium that ultimately led to the Mount Pellerin society; and historically in the works of Carroll Quigley.

    In the us, we are seeing private equity, which leaves control in the owners. Other than that what is done with corporate surpluses?

  • Rich Rostrom

    Chicago’s Midway Airport handles over 70,000 pax/hectare-year.

    It’s wedged into the outer part of the city, with no empty space around it (one mile square).

    I thought Hong Kong would be up there, but it’s only about 43,000 pax/h-y. Schiphol is about 44,000. (I picked them as likely being tight on area.)

    Getting the areas of airports is tricky, since one doesn’t want only the largest.

    Googling turns up this blogpost:

    http://citylines.wordpress.com/2012/10/29/the-largest-airports-in-the-world-v-does-the-size-really-matter/

    The author claims Heathrow to be have the highest pax/h-y at 57K, but he gives Schiphol only 24K, so I don’t trust his numbers.

    “Not a lot of planes crash *at* the airport…” but they crash there more than any other individual place. Also, airplanes are noisy, and people don’t want to live under the approach paths.

  • Laird

    As Rich Rostrum says, airplanes are noisy. I think that, more than the risk of crashes (extremely rare, in commercial aviation) is the reason for all the excess land around airports, particularly on the approachways.

    I do think that Midwesterner’s comment about multipurposing the excess land for farming is an excellent idea.

  • RRS

    Anecdote:

    On leaving a flight (2d leg from San Diego via Houston)after a difficult landing in very bad winds, the captain who knew me as a regular said:

    God! I love Dulles it’s so forgiving!

    Think about that. Think about the approach at San Diego, the limits at Reagan.

  • Willer

    Isn’t it as much the actual decision which he is referring to as well as the Keynesian financing?

  • Paul Marks

    O.K. Willer.

    If Mr B. just wants a quick decision, on his various government schemes, I will give him one.

    No.

    Just “no” – takes about a second to say. Quick enough?

    Governments are not fit guardians for capital.

    California is an obvious example – they are wasting vast sums of money on long range passenger railroads (a rail system that will not be used).

    Yet let a private company extend the freight railroad to the port at L.A.(where it used to go) – no that is against the rules.

    So the trains must be unloaded, the freight loaded on to trucks, driven to the port, unloaded from the trucks again…….

    Meanwhile billions get spent on a new passenger rail service to go from nowhere to nowhere – so that (if the trains ever run) empty trans can thunder along……

  • Willer

    I sympathise with the waste you cite in LA. However isn’t there a difference between public sector involvement and expensive, somewhat useless, government projects.

    For example suppose there was a civil servant charged with the decision of whether to allow any private sector investment in California this year. I’m not saying a civil servant should ever have that power. But supposing they did, just as in the UK government makes the decision over airport expansion, you’d want them to make a decision quickly and you’d want the answer to be yes, surely?

  • Paul Marks

    Willer – I repeat what I have already said.

    The answer to Mr B. should indeed be swift – but it should also be NO.

    Just say NO.

  • Jaded Voluntaryist

    I’ve never found a satisfactory answer to the following question:

    If government projects have the capacity to create wealth through taxpayer funded employment and “knock on” benefits, why do we not simply sequester the entire population to a project constructing a 70 mile tall sculpture of a banana?

    Boom, 100% employment, no?

  • Rich Rostrom

    Laird February 12, 2013 at 5:34 am:As Rich Rostrum says…

    That’s Rostrom, blast you! (It’s the one thing I always complain about.)

  • Julie near Chicago

    JV, the answer to your question is stunningly obvious. It’s simply because of the natural curvature of the banana. The thing would appear to be listing in the direction of the overhang, causing seasickness amongst the observers and thus adding to global pollution. People instinctively grasp this unintended consequence.

    Suggest you sculpt a 70-mile-tall carrot instead (using a nice straight well-formed one as the model). Note also, carrots carry a suggestion of health, being vegetables instead of fruits with all their associated sugar. The only difficulty with the carrot is that overindulgence in it tends to turn the skin bright orange. Simply make the sculpture of glass, or possibly travertine marble, and this should cause no problems.

    PS. Someone might object that essentially, this would be a cone standing on its point so liable to tipping over. However, if properly designed the thing will be metastable–thus balanced on the point, so that it won’t fall over unless some idiot leans on it while tying his shoelaces.

  • Bruce Hoult

    Something which has I think been overlooked is that such a carrot (or banana) would have considerable practical value if it is permitted to place antennas on it.

    The slope distance to the horizon from the top of a 70 mile high structure is 1204 km or 748 miles. (the distance over the surface is 1190 km or 739 miles).

    Perhaps more practically, the distance at which the top of the carrot is 5º above the horizon is 756 km (470 miles)

    If the carrot was built in Basel or Zurich, it could provide internet and TV to all of France, Germany, Czech Republic, Austria, Switzerland, and Italy north of Rome. That’s approximately 200 million people.

  • I am afraid that neither a banana nor a carrot are viable options. The former is unacceptable, as Julie quite rightly points out, due to its naturally mandated curvature. The latter is similarly unacceptable because no such naturally mandated standards seem to exist as of yet, and so we are left with no option other than to patiently await farther instructions from above with regard to naturally acceptable standards for carrots.

  • Laird

    Sorry, Rich. I’ll try to do better in the future!

  • Julie near Chicago

    Bruce, an excellent thought, as the entertainment so provided would keep the workers off the streets and out of the hair of bureaucrats, where they might do injury to the lice which make their homes therein. We should take your scheme under advisement.

    Alisa, you raise an extremely nettlesome point. To wit:

    The curvature of the banana being, as your citation shows, naturally mandated, one must assume that the banana itself is naturally mandated; thus, it exists. It is, in a manner of speaking, “the container for the thing contained” (the latter being the curvature in question).

    The carrot, lacking any natural mandate as to its attributes, characteristics, or qualities, may not exist at all; since that which exists must exist as something, which somethingness we apprehend only as a result of its attributes &c.

    Logic therefore suggests that the idea of the carrot as an actual existent is the result of mass hypnosis, possibly an example of mass hysteria and panic brought on by the existence of Mr. Bootle’s theories; or, in terms of the Root Cause (of the panic, not of the carrot), the existence of Mr. Bootle himself.

    I sincerely hope this is not the case as just last evening I had for supper a lentil soup whose enjoyability was enhanced by the inclusion of chopped carrots in the pot. I do hope I was not merely in grip of Bootlean gustatory hallucination….

    But one cannot argue with basic logic.

  • I sincerely hope this is not the case as just last evening I had for supper a lentil soup whose enjoyability was enhanced by the inclusion of chopped carrots in the pot. I do hope I was not merely in grip of Bootlean gustatory hallucination

    False consciousness?

  • Midwesterner

    Logic therefore suggests that the idea of the carrot as an actual existent is the result of mass hypnosis, possibly an example of mass hysteria and panic brought on by the existence of Mr. Bootle’s theories; or, in terms of the Root Cause (of the panic, not of the carrot), the existence of Mr. Bootle himself.

    No, I’m pretty sure this is true because I read it on the internet.

    It was Bug’s Bunny that created the carrot allusion. Because he is always alluding to a carrot. Disney tried to trademark the carrot but they couldn’t because Bugs Bunny works for Warner Brothers. It turn out they had to pay royalties to Peter Cottontail and Mr. MacGregor because of trademark infringement.

    All clear now?

  • veryretired

    Hysterical.

    I have rarely seen such a serious thread spin into inspired lunacy so wonderfully.

    Long live the carrott/banana controversy. When will we see a thorough documentary on this important subject by the BBC?

    The world wonders…

  • Julie near Chicago

    Rrrri-i-ightttt. :-)))!!!

    That’s all, folks!

  • Midwesterner

    Julie’s comment set to music.

  • Shhh! Be vewy , vewy quiet . I’m wooking for wogic…

  • Julie near Chicago

    Awisa: You’we wooking in the wong place. :(

  • […] “Preposterous Keynesian fallacy at work. It presupposes that money allocated to some project via the political process is more likely to create a ‘multiplier’ than market driven uses of that money… and it assumes that the money taken by the state by force would not have been invested in something more worthwhile in aggregate if the decisions were left to its original owners before it was confiscated by the state.” –  Perry De Havilland […]