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Wed, Nov. 7th, 2012, 03:00 pm
Useful Political Analogy

On a recent visit home, my mother and I got into it over the value of government services, and whether it was worthwhile to go into deficit to support social programs. I don't know if I was able to communicate my idea that government has economic value, even though it doesn't directly produce wealth (her phrase, arguably put, but I hope my meaning is clear).

C.L. Hanson at Letters From A Broad posted an essay about the public/private divide in which she uses the analogy of a lighthouse.
I think the classic example from economics 101 is the lighthouse. In a costal city, no private individual or corporation profits enough from the lighthouse to pay the entire cost of building it, but the entire city profits from the trade that is made possible by affording ships safe access to the local harbor.

Well, either I didn't get that analogy, or I didn't remember it from Economics, so I'll try to remember it for the next time it comes up. (Emily really hopes it doesn't come up.)

Wed, Nov. 21st, 2012 10:54 pm (UTC)

I notice the lighthouse example refers to "profit". Fine, when there is profit tax it to maintain the lighthouse but when there isn't don't go into debt to redecorate the lighthouse!
P.S. And I don't know what Emily means? ;D

Thu, Nov. 29th, 2012 11:24 pm (UTC)

You've got a double standard there: are you maintaining, or redecorating the lighthouse?

Government can create wealth by building the lighthouse in the first place, and can recoup the debt in taxation on the profit.