Discussion:
This article argues that the U.S. government must take the opportunity now to increase public investment, before this fiscal climate changes. The writer argues that the fear of increasing taxes to fund such projects is unfounded, as is the fear of slipping further into debt. He or she cites examples of a boost in GDP due to such projects, covering and surpassing the debt caused. In fact, it is with slow-growing economies that borrowing and funding is most profitable, due to low interest rates and minimal competition for loans. It is for these reasons that the writer argues that the U.S. should invest in public goods – the economic climate is just right. The only problem is what to invest in: while most economies can easily pinpoint deteriorating infrastructure, those projects may be a waste of time and money.
Key words:
Natural monopoly – This is where the lowest price can only be achieved if the market has a monopoly. The article gives three examples of natural monopolies:
“telephone network, electricity grid or sewer system.” The article goes on to explaining why it is best to have a natural monopoly – “fixed costs… are typically high and operating costs relatively low”.
Crowding in – This is the opposite of the crowding out effect, and is where government spending on public projects boosts the demand for a good, and so, increases the private investment in it.
For more on infrastructure and investment, read “Government Spending Booms Not So Great for Long-Term Growth” and “Bridges to Somewhere"
This article argues that the U.S. government must take the opportunity now to increase public investment, before this fiscal climate changes. The writer argues that the fear of increasing taxes to fund such projects is unfounded, as is the fear of slipping further into debt. He or she cites examples of a boost in GDP due to such projects, covering and surpassing the debt caused. In fact, it is with slow-growing economies that borrowing and funding is most profitable, due to low interest rates and minimal competition for loans. It is for these reasons that the writer argues that the U.S. should invest in public goods – the economic climate is just right. The only problem is what to invest in: while most economies can easily pinpoint deteriorating infrastructure, those projects may be a waste of time and money.
Key words:
Natural monopoly – This is where the lowest price can only be achieved if the market has a monopoly. The article gives three examples of natural monopolies:
“telephone network, electricity grid or sewer system.” The article goes on to explaining why it is best to have a natural monopoly – “fixed costs… are typically high and operating costs relatively low”.
Crowding in – This is the opposite of the crowding out effect, and is where government spending on public projects boosts the demand for a good, and so, increases the private investment in it.
For more on infrastructure and investment, read “Government Spending Booms Not So Great for Long-Term Growth” and “Bridges to Somewhere"
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