Ed Lotterman: Balancing economic growth, public good

April 4, 2014 

However many photos you have seen, when you actually walk up to the Roman aqueduct in Segovia, Spain, it is breathtaking. It also inspires questions. How could a civilization with such limited technology and using only human and animal power have constructed such a giant piece of infrastructure? Without optics, how did they maintain such exact surveying control? How did they quarry, transport and lift so much granite?

An economist has other questions: What fraction of total Roman gross domestic product went into producing such public works? What was the structure of Roman public finance? Were taxes on the rich valleys of northern Italy used to fund aqueduct building on the frontiers? Or did the populace around Segovia have a crushing tax burden? Was the treasure taken by conquest or was such work done by captured slaves?

Going further, if libertarian economies with minimal government involvement really are more economically efficient, as their advocates argue, why were no such great works ever erected by civilizations that focused on individual autonomy rather than government action? And did Roman politicians have such debates?

These questions go to the heart of age-old disputes about the role of government in an economy. In what ways and to what extent is government action required to make economies productive? At what point does it become counterproductive?

Would we have modern electronic devices or the Internet, much less interstate highways or large hydroelectric dams, without government? Do the negative incentives of taxation outweigh the positive productive effects of national security, public order and public goods such as roads, public health and tornado warnings?

Does government establishment of "welfare" programs such as food stamps or Medicare drug benefits eventually consume so much of a society's capacity to pay taxes that more necessary public goods like roads and dams depreciate away? Are Supplemental Security Income payments or subsidized student loans the modern-day equivalent of the bread and circuses that Roman "makers" had to provide to their society's "takers," leading to inevitable social and economic breakdown?

Looking at it another way, what price, if any, in personal freedom, did people under Roman rule have to pay for public order and clean water? Were their lives any less nasty, brutish or short had they been barbarians outside the frontier of Roman conquest?

It is clear that to construct lasting infrastructure, early governments needed to wield great power, including the ability to impose a heavy tax burden, in case or in kind, on subject peoples. Ancient infrastructure like the irrigation works in the Indus Valley, Roman bridges and Incan Andean terraces all required forced labor. But they also resulted in greater day-to-day safety and usually greater food availability than enjoyed in smaller societies that had less coercion and perhaps greater individual autonomy, although tribal membership often involved forced obedience too.

Rome accomplished a lot. But it, like the civilizations that built Asian temples, Nile valley monuments, the Acropolis and the Incan road from Cuzco to Quito, all fell eventually, and often to less advanced and apparently less organized foes. What causes inner rot? Is it military spending brought by imperial overreach? Is it the creation of disincentives to work by corrupt governments? Is it degeneration of government into a sclerotic force that stifles individual creativity?

Comparisons would be easier if there ever had been a society that might have met the libertarian standards of Friedrich Hayek or Ludwig von Mises, but there haven't been. Industrial Revolution Britain may have come close, and 19th-century America infringed less on individual autonomy, at least of white people, than it does today. That may have been easier with a population of 40 million rather than 315 million.

Some early infrastructure construction, including the Erie and other canals and pre-Civil War railroads, was largely initiated by private enterprise. Many of these projects, however, did involve state legislatures granting monopolistic charters, use of eminent domain or grants of land. However, in contrast to Europe, the U.S. telegraph net involved little government action.

The transcontinental railroads got great government subsidies. Harbor and river navigation improvements were nearly all government projects. Private companies built small dams for irrigation and hydroelectric production, but the large ones did not commence until state and federal government took a central role.

Defense needs always have been an impetus to production of "public goods," in the sense economists use the term, items that are "nonrival" and "nonexcludable" in consumption, such as fire protection. Segovia and its aqueduct existed to support a Roman military base on the frontier of the empire. Nearly all of modern electronics technology and materials science stem from World War II and Cold War military-oriented or funded research.

We wouldn't have the Internet without military communication infrastructure. Private enterprise might have eventually produced the 3-D seismic imaging that is key to developing North Dakota's oil, but it would have taken many decades if not for federal support of research to facilitate finding Russian submarines or for the National Security Agency to listen in on and decode the utterances of far-away presidents and infantry leaders.

Second-century Segovians wouldn't have had clean water, and their 21st-century counterparts wouldn't have smartphones if not for government action, that is clear. But that doesn't help us identify the point at which government action in the economy becomes counterproductive.

Economist Edward Lotterman writes in St. Paul, Minn. Write him at boise@edlotterman.com.

Idaho Statesman is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service