Suppose that the US government would create a set of technological research projects with a large amount (perhaps several billion or so) in annual funding. The research would be kept secret until the economy hits a decisive downturn. Once the folks in charge of the program deem that it is time, they will lease nonexclusive rights to the use of some of the patents derived from the projects at initially low but gradually increasing rates to companies within the nation. This should theoretically provide employment and stimulate growth.
If you pay for those project in a relatively good economic climate and not in the downturn, you are actually working procyclical, because you create additional demand. A countercyclical measure would be boosting research (or investment in infrastructure, defense…) in bad economic climate even if this means that you have to borrow the money.
Of course a neo-classical economist will tell you that this is extremely undesirable, and we have a truly Great Debate.
I think the OP is referring to some kind of technological Keynesianism, where we would invest more money in technology during the good times, then release it during the bad times to stimulate the economy and make it more productive.
The biggest problem with this is that government is terrible at creating technology. Efforts to spend huge amounts of money to create ‘winning’ technology assumes that you can identify ‘winning’ technology beforehand - and that that technology is creatable by government when private industry can’t do it.
There is no shortage of examples of governments attempting to drive technological progress - most of them massive failures. MITI in Japan, chip consortiums in the U.S., etc. Remember when France was the darling of the tech world for its investment in Minitel? It turns out that that investment was a major roadblock to converting the French to the internet when it came along. For the first few years of the internet boom, France lagged the rest of the world substantially in household internet connections. I wouldn’t be surprised if it still does.
What I meant is that investing more in good times is a mortal sin in Keynesianism, and wanting to act countercyclical suggests at least a vaguely Keynesian standpoint. So you can’t have it both ways.
Now, predicting the right technology, completing the research and delaying the payment (interest-free) until the bad times are there, that might be a neat thing
Nope. Let’s suppose that you somehow* create this new technology, keep it secret, and it was actually a product that people wanted. You’d still be left with the time necessary to market the product and ramp prodcution to meet demand. Given that most economic downturns only last 9 - 18 months, you’d most likely be ready just in time for the next boom.
“This should theoretically provide employment and stimulate growth.”
I am unfamiliar with this economic theory.
It sounds like a technology “New Deal” for Bizarro world. Basically creating technology jobs to occupy the idle and unemployed when times are good and then unleashing that mystery technology during recessions when no one can afford it.
This is the argument big business always makes to prevent the government from having an industrial policy. Like companies, MITI experienced both successes (semiconductors and automobiles) and failures (analog HDTV). One can name spectacular government successes like GPS as well as pathetic corporate failures like the high-subsonic transports that ruined Convair.
Companies try to identify “winning” technologies all the time. The only difference between companies doing it and the government doing it is that if a company picks too many losers, it eventually goes out of business. The lesson to be learned is not that government involvement in technology development is always bad, but rather that the government, just like corporations, needs to recognize when it’s time to cut and run.
The creation of those facilities is a means to the end of creating that technology, not the employment it would generate; the latter would be a crappy payoff indeed. It can also be started during whatever point in the cycle; that’s a moot point.
The idea is that the interest rates are lowered in a downturn anyway; generate a new, desirable commodity for the entrepreneurs to create, and that’s as close as one can get to smoothing the waves of the economic cycle into a wheelchair ramp.
That’s one of the main stumpers. Suppose most of the technology was geared toward biotechnology or communications, something there would unquestionable be a demand for, assuming solid results.
Well, the idea is that there would be jobs created for the actual production, construction of the facilities for such, etc. Actual profit for the company would probably start toward the end of the downturn or afterward.
I too, am wary of the government’s ability to pick winners. Take the Federal Housing Program: starting in the 1950’s the decision was made that the Federal government would fund low-income housing construction, in the cities of our country. Now, 50 years later, what do we have? Hundreds of billions (possibly trillions) added to the national debt, and thousands of high-rise slums that are hell on earth to live in. Of course, the builders and construction workers got rich–and the local politicians and fixers got a huge amount of graft. The losers? The tenants of these slums, and the taxpayers. SAnybody remember the story of the Cabrini-Green Hosing complex (St. Louis, I believe). A huge high rise apartmement building went up, and was rapidly tenanted by very poor people. The result? Drug peddlers and pimps tookover-peple were being killed by stray bullets in their own apartments. Finally, after the local police refused to patrol the place, it was blown up! The government decided that it was cheaper to raze the place rather than allow the private market to supply housing.
Or transportation: again the Federal govet. poured money into airports and subsidized airline companies in the 50’s and 60’s-so now, we have an air transport system that is energy-inefficient, and a railroad system that its falling apart-just the situation YOU DON’T nedd for an economy faced with high oil prices!
Anybody who thinks the governemnt has a magic crystal ball is crazy!
