Deirdre McCloskey and Alberto Mingardi: The Myth of the Entrepreneurial State

The Injustice of Corporate Welfare

Dilbart on Shane Jones and his regional speedup

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John Oliver on Economic Development

Free To Choose 1980 – The Tyranny of Control – Hand Looms

The “Dutch Disease” – @DavidParkerMP to note on export growth fetish

Corporate welfare explained

Johan Norberg – Picking Winners or Losers

Speaking of picking winners

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Don’t Feed Business @TaxpayersUnion @JordNZ

Subsidies explained

Yes Prime Minister on a minister of manufacturing @jamespeshaw @julieannegenter

 

Nitpicking @stevenljoyce reply 2 @TaxpayersUnion on corporate welfare @JordNZ

The best the Minister for Economic Development, Steven Joyce, could do in response to my recent report on corporate welfare was nit-picking. Joyce said my definition of corporate welfare was flawed and that spending on R&D will grow the economy. He said

“To brand things like tourism promotion and building cycle-ways as corporate welfare is, I think, creative but not accurate at all.”

Joyce also said my report was

just somebody picking out a whole bunch of government programmes that in many cases don’t involve payments to firms at all…

Those that do involve payments to firms are specifically designed to encourage the development for example of the business R&D industry. Politicians don’t choose them.

Payments in kind are business subsidies. R&D is so important to the economy that the last thing you want is its direction to be biased by funding from government. Bureaucrats have a conservative bias and do not fund oddballs and long shots. The oddballs and hippies in the picture below could only afford the photo because they won a radio competition in Arizona.

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The R&D expenditure that was criticised in my report was commercialisation, not basic research, which was specifically praised. Which research to commercialise is for entrepreneurs.

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There is no reason whatsoever to think bureaucrats administering R&D subsidy budgets set by politicians are any better than private entrepreneurs at picking the next big thing.

If bureaucrats were any good at picking winners, were any good at beating the market, they would go work for a hedge fund on an astronomically better salary package. The salary package of one top hedge fund manager exceeds the entire payroll budget of most New Zealand government departments including those administering R&D subsidies and other hand-outs.

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Government expenditure in vital areas such as innovation should be justified on the basis of cost-benefit ratios and a rationale for why bureaucrats have superior access to information about the entrepreneurial prospects of unproven technologies and product prototypes. 

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Subsidies should not be defended because of their popularity and sexiness as Mr Joyce did for the film industry, tourism promotion and ultra-fast broadband

If they told New Zealanders that in their view tourism promotion should be cancelled, the film industry should close down, that their shouldn’t be any ultra-fast broadband…I don’t think people would be that enamoured with it.

On irrigation funding, Mr. Joyce cited a report by NZIER that found irrigation contributes $2.2 billion to the economy. Irrigation is a private good which can funded by pricing it properly including the recovery of capital costs. There is no case for a subsidy.

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Public goods have spillovers, private goods such as water and irrigation do not. Users can fund the irrigation themselves buying as little or as much water as they are willing to pay out for out their own pockets. The NZIER report noted that it was not about the case for public funding:

… we are not able to quantify the environmental or social impacts if irrigation had never occurred. We also do not attempt to investigate the relative merits of public versus private sector funding of the schemes.

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#Corporatewelfare since 2008 @JordNZ @MatthewHootonNZ @GrantRobertson1 @stevenljoyce

My latest corporate welfare report is out at the Taxpayers Union website. The company tax could be 6 percentage points lower but for this generosity of politicians picking winners.

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Source: New Zealand Budget Papers, various years.

It is not as bad as you think under the last Labour  government budget. $700 million of  those hand-outs to business was seed capital for agricultural research institute. That institute to be run out of the investment income on that $700 million one-off injection which the incoming National Party-led government cancelled.

Another $675 million in that last Labour budget was to KiwiRail and OnTrack. Other than that, the Labour Party ran a pretty tight ship on business subsidies. There are no particular record of picking winners. Labour did buy a real loser in KiwiRail. You heard it here first.

Remember this every time the Left says the government invented the Internet

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Source: US nuclear force still uses floppy disks – BBC News.

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