Aerotropolis: Digging Holes Above Ground

While many have asserted that John Maynard Keynes said that the government should pay some people to dig holes and other people to fill them, those aren't exactly his words. He did write a lengthy, convoluted paragraph in his General Theory which conveys the same idea. Keynesian theory asserts that raising aggregate demand is critical to getting markets going again after a recession hits.

The problem with this is that the resources expended hastily in this manner can not be reclaimed in the future for better uses. The unseen effect of present spending is the loss of better future opportunities. Frédéric Bastiat illustrated this point with the broken window fallacy in his essay What is Seen and What is Not Seen. Nonetheless, paying some people to dig holes while others fill them will raise aggregate demand and satiate the short-sighted goals of Keynesian theory.

The St. Louis area has 18 million square feet of empty warehouse space. You can think of a warehouse as an above ground hole.

The Missouri legislature and Governor Jay Nixon are considering a special session for a St. Louis "Aerotropolis" and part of that legislation involves a $300 million earmark for the construction of more warehouse space. With 18 million square feet available, it's absurd to suggest that supply is constrained, so the purpose of these new holes must be a Keynesian boost to aggregate demand.

The irony is that many warehouses in north St. Louis city have been torn down over the past several years. Often eminent domain has been granted by the city and property developers have been given tax incentives to demolish these "blighted" buildings.

Demolishing a warehouse is the above ground equivalent of filling in a hole. Thus we see the completion of Keynes's value destroying, live-for-the-moment theory: tax dollars subsidize the demolition of warehouses as well as their construction and better uses for those tax dollars go unrealized and unseen.

Related articles

• Ed Martin talks about the St. Louis Aerotropolis (rebootcongress.blogspot.com)
• Prediction: The White House Wants Another Keynesian Economist (rebootcongress.blogspot.com)
• Rebuilding, Not Rebranding (showmedaily.org)
• It's Still a Flight of Fancy (showmedaily.org)
• Air Cargo Expert Hammers Aerotropolis Plan in Industry Publication (showmedaily.org)
• Aerotropolis Tax Credits Are Still a Bad Idea (showmedaily.org)
• "You Smell a Rat That's Wrapped in Week-Old Fishpaper" (showmedaily.org)
• Stunner: Both St. Louis Del Tacos Closed Their Doors for Good Last Night (showmedaily.org)
• Why Keynesianism is Attractive (economicnoise.com)

Government Spending Kills Jobs

Rasmussen Reports that politicians and government spending cause downsizing:

Of all the myths helping to sustain the unsustainable status quo in Washington, D.C., among the most widely accepted is the belief that a politician’s seniority translates into tangible economic benefits for his or her district. In fact, this perception works hand-in-glove with another central government myth – the one about politicians being able to create private sector jobs with your tax dollars in the first place.

...

In fact, the research that could end up blowing these myths out of the water seems to have come about accidentally – or at least as an afterthought. Three professors at Harvard Business School – Lauren Cohen, Joshua Coval and Christopher Malloy – were examining the correlation between politically-connected firms and powerful legislative committee chairmen when they stumbled upon something “unexpected.”

What did they discover? Something free market advocates have known for years: Government spending kills jobs.

“It was an enormous surprise, at least to us, to learn that the average firm in the chairman’s state did not benefit at all from the increase in spending,” says Coval. “Indeed, the firms significantly cut physical and R&D spending, reduced employment, and experienced lower sales.”

This is only surprising if you're a Keynesian... if you do not see that paying one set of people to dig ditches and another set of people to fill them in is a variant on Bastiat's broken window fallacy.

Bastiat's Candle Makers Live in Ontario

Headline: Online Carpooling Service Fined For Unregulated Transportation (via Slashdot)

...the web offers the ability to find other people traveling to the same general place you're heading and to set up a convenient carpool. It's good for the environment. It's good for traffic. It just makes a lot of sense. Unless, of course, you're a bus company and you're so afraid that people will use such a system rather than paying to take the bus.

A Petition
(Adapted from Bastiat's Economic Sophisms.)

From the drivers of buses and the producers of diesel fuel and generally of everyone connected with taxpayer funded transportation.

To the Honorable Members of an Ontario Court.

Gentlemen:

You are on the right road. You reject abstract theories and have little regard for the traveling public. You concern yourselves mainly with the fate of the humble driver of public transportation. You wish to free him from local competition, that is, to reserve the commuter's fare for a regulated industry.

We come to offer you a wonderful opportunity for applying your—what shall we call it? Your theory? No, nothing is more deceptive than theory. Your doctrine? Your system? Your principle? But you dislike doctrines, you have a horror of systems, and, as for principles, you deny that there are any in political economy; therefore we shall call it your practice—your practice without theory and without principle.

We are suffering from the ruinous competition of a local rival who apparently leverages technology so far superior to our own for the transportation of travelers that they are offering their service below our price; for the each traveler that uses this rival, our sales cease, all the travelers turn to them, and a branch of taxpayer subsidized Canadian transportation is all at once reduced to complete stagnation. This rival, which is none other than PickupPal, is waging war on us so mercilessly that we suspect they are being stirred up against us by perfidious Barbados (excellent diplomacy nowadays!), particularly because they have for that haughty island a respect that they do not show for us.

Now go read the unadulterated version!