Have U.S. government subsidies ever made a product cost effective and efficient?
Aside from memory foam, cochlear implants, Dustbusters, ‘space blankets’, and a bunch of other stuff developed with NASA’s Innovative Partnerships Program; and of course the World Wide Web, which got a lot of funding from DARPA; oh, and the efficiency improvements applied to commercial aircraft that were adapted from government projects…
OK, let me rephrase this: Some people claim that the government cannot do anything cost effectively, and so government funds should not be spent on developing, or helping private companies, to make consumer products.
Does there exist a list of consumer products that are successful, that were developed either with government funding/subsidies, or for government use that are now commonly used by consumers?
Stuff developed by NASA for example wasn’t “made cost effective and efficient with government subsidies” they were in fact developed by the government, and those are different things. It’s the difference between developing a Saturn V rocket (done with actual government funds and a large portion of the research team were government as well) and say, subsidizing the production of ethanol from corn. One is giving some pecuniary benefit to an activity private individuals are engaging in for their own purposes and the other is the government developing things itself or directly paying contractors to develop things for the government’s use.
I should also mention (and I do this anytime I see it), by and large Sir Tim Berners-Lee deserves almost sole credit for the creation of the World Wide Web. It was his idea to take hypertext technology and combine it with “web pages” that you can navigate to through a browser over computer networks. DARPA developed the internet, the internet predates the World Wide Web and the terms are not actually interchangeable.
If your question is “has the government ever done anything cost effectively/efficiently” the answer is yes. Medicare for example–and that’s just the easiest. If your question is “has the government developed products in a cost effective/efficient way” then I’d say “probably yes” but I’d have to think about it and look at the numbers. I’d guess the internet as developed by DARPA represents a pretty good return on investment for example. Memory foam and space blankets I’m not sure, as I know some specific things developed by NASA actually cost a lot of money (the space pen for example) for little utility.
And finally, if your question is whether subsidies have ever made a product cost effective–I’d have to argue no. Subsidies by their nature enrich market participants in that product/service essentially through government largesse. If the government pays me $0.20 a gallon on top of whatever the market price is for corn ethanol, then taxpayers are basically subsidizing my production. If the government offers a $10,000 tax credit for purchasers of my product, then the taxpayers are subsidizing the consumers of my product. Either way, a subsidy by its nature creates a result that is not market efficient, because it is giving support from society in whole to participants in a subset of the economy.
That doesn’t necessarily mean subsidies are always bad, they can serve a purpose, but the subsidy itself doesn’t represent an efficiency improvement and I’d say really represents the opposite of that.
Where I live government subsidies were essential in getting the recycling business up and going till it became profitable.
I live where there was once a lot of tobacco grown and I know government subsidiaries helped many of those farmers switch crops, not sure that’s what you meant though.
Another example of this is building, and then running, the Panama Canal.
(However, I have heard it said jokingly that the Panama Canal was the last US Federal Government project that was brought in under budget and ahead of schedule.:))
So the Interstate H’way system was a big boondoggle.
One problem about alternative power is that the oil and coal companies get so much in the way of public subsidies (tax benefits and ignoring externalities) that the subsidies are needed to level the playing field.
I offer lasers as the result of public investment in pure research.
Then there’s the whole e-commerce thing which was given the advantage of being free of state sales taxes.
Railroads were subsidized by giving the rail companies property along the tracks. I don’t know if this was typical, but I happen to know that the Illinois Central was given alternating square miles along the tracks. The house I owned in Champaign was on land that was originally property of the railroad.
Govt funds a lot of basic research. As to solar power for example, it was recently discovered that you could useambient noise to induce quantum coherence much like plants do for photosynthesis. I’m not sure if govt funds were used for that research but that is the sort of thing that you need govt support for and that can lead to huge leaps in technology. Those leaps in turn lead to huge leaps in productivity and economic wealth.
According to the current Secretary of the Navy, in the late 1880s the Navy was faced with a choice: buy English or German steel at $150 a ton, or pay domestic producers $462 a ton. The Navy decided to invest in US steel, and within 20 years all US Navy ships were being built with domestically produced steel, plus steel became a huge industry in the US. Cite. (See bottom of page 8.)
The compact fluorescent lamp has benefited hugely from US government investment. The Wikipedia article is woefully short of information about it, but the NRDC site has:
My apartment is lit entirely with CFLs. My only issue with them is that I need to find a brand that is designed to burn base-up, as they occasionally overheat and shut down. But on the other hand, I’ll be moving to LEDs soon.
The entire infrastructure of the country wouldn’t have existed without government subsidies. Canals, roads, bridges, trains, air travel. The U.S. is fairly unique in the way that private and public projects and corporations competed and mingled and you can argue forever whether private or public ownership is better of worse in any individual case. But there never was enough capital in existence to fund national infrastructure entirely privately. Not understanding this should take you out of the argument. (Ha. I wish.)
Anyway, my nominee would be airmail. The entire air system of the U.S. was essentially underwritten by airmail contracts with the government. Airmail was fast, efficient, and ubiquitous almost from its inception. Airmail was expensive, but much less so than contemporaneous long distance phone calls.
Is airmail a consumer product? Not in the ordinary sense, although there are private companies cream-skimming the product today. However, the criticism today is not really about the government funding particular consumer products but about the government encouraging companies to do r&d on new technologies. So if anybody is confusing the two - which they are - they are wrong-headed from the start and should be taken out of the argument. (Ha, again.)
I do not know how much of the price decline was due to subsidies (both to R&D and production), how much was due to market forces and what was due to international subsides, but wind power has gone down drastically in price. It is now growing drastically in capacity because of its price decline.
Actually proving causation is tricky but it’s somewhat more clearcut when looking at Asian economies where there’s been a much more explicit interventionist role by the government. America invented the television but by the 70’s, the majority of televisions were being manufactured in Japan. This was, in part, because the Japanese government enacted protectionist policies that protected the fledgling Japanese TV industry from competition and then removed them when the cost advantages made them impossible to compete with on a global stage.
Similar policies were enacted in Korea around DRAM and Taiwan around other semi-conductor technology and Samsung and TSMC are now the largest supplies of a diverse range of electronic components.
And while we’re talking electricity, The Tennessee Valley Authority and Bonneville Power Authority. Both regions were dramatically underserved by privately owned electric companies, who showed no signs of ever being able to raise sufficient capital to wire those areas.
All right, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, the fresh-water system, and public health, what have the Romans ever done for us?
TV as we know it grew out of many different inventors in many different countries, but the universally credited “father of television” was a Scot, John Logie Baird.
Baird isn’t universally credited with the invention except in the UK. Baird was beaten to cathode ray tube displays by Boris Rosing, a Russian, and to modern all-electronic displays by Philo Farnsworth.
