Government can do no good, except where it can

While eating breakfast in a restaurant near our farm this week, I overheard a farmer in the next booth explaining how adopting precision farming was boosting his yields and profits. This matches seeding and fertilizer rates to small differences in productive capacity across a field.

Then the conversation switched to politics. He opined: “There is nothing that the government does right, and it does nothing that helps the economy at all.”

He had no idea of the irony in his assertions. His higher production and income would never have happened without government.

Precision farming hangs entirely on precise control of location while planting, fertilizing, spraying or harvesting a field. It uses “differential GPS,” inputting real-time locations to an onboard farm machine computer that controls seed and fertilizer rates or logs production. It may even steer the machine.

The “GPS” part of this technology depends on the Global Positioning System produced by the federal government. The “differential” part is additional data supplied through ground stations usually operated by state transportation departments. These supply “corrections” that augment the accuracy of satellite positioning from being within a few yards to fractions of an inch.

That accuracy is “survey grade,” indicating why the government agency most visible for repairing highway supplies data to farmers. The same technology can guide snow plows and lay out a new highway interchange. And it can replace private-sector surveying.

When we installed drainage tile in our farm in 1958, the contractors spent days with transit, surveyors’ rod and stakes. By the mid-1970s, lasers replaced these. Now, all a farmer needs to install tile is to work with the same receiver-computer in his tractor.

Savings when draining a field, plowing a highway or building a freeway ramp are increases in economic efficiency. So are higher yields of corn and reduced use of fertilizer. This is basic economics. Living standards grow; society gets more goods and services to meet people’s needs for the same use of resources.

Given these benefits and the apparent market demand, would — and could — the private sector produce similar technology?

In economic terms, differential GPS has the classic characteristics of a “public good;” it is “nonrival and nonexcludable.”

“Nonrival” means its use by one person does not mean someone else cannot use it. A hamburger is rival. If I eat it, you cannot. A tornado warning siren is nonrival. Even if I hear it, so can you. Ditto for a differential GPS signal. A farmer can use it to plant the bottom field while a highway crew surveys for a new bridge and a drainage contractor installs tile, all without interfering with each other.

Similarly, my hamburger is excludable. The fast-food joint can refuse it to me unless I pay for it. But it is impossible to keep nonpayers from hearing the tornado warning. It is nearly impossible to keep anyone from using a GPS signal. One can encode the differential corrections put out by the DOT and charge for them. But the marginal cost of one more user is near zero, so society is best off if it is provided free.

The private sector never would have put dozens of navigation satellites into orbit, because excludability was nearly impossible at that time. The investment was tens of billions of dollars, and there seemed to be few uses besides military and navigation. The government was already spending tens of millions on the LORAN system of tower-based navigation signals. The military advantages alone were deemed overwhelming enough to justify the outlay.

The military worried enough about enemy use of the signals that for two decades, the signal available to others was degraded to make locations less accurate. But as the civilian applications of GPS and the economic productivity boom that would spring from more-accurate location data became evident, President Clinton eventually ended the signal degradation.

In the interim, research in both public and private sectors had developed the “differential” part of contemporary technology. Internet communications were also key to this. Indeed, some thinly populated parts of the U.S. still lack the degree of precision available elsewhere because of the lack of reliable high-speed links.

So it was not government alone that got us to where we are. But we never would have gotten here without government.

And as with rural electrification and solid-state electronics of bygone years, we never could have known then how much the new technology would do for productivity, or which markets would develop. Private electric companies refused to string wires to farms because the revenue from a few light bulbs in farmhouses would never pay for poles, wires and transformers. No one in 1932 guessed how many electric motors there would be on farms by 1972.

Similarly, when engineers from Fairchild Semiconductor spun off into what is now Intel, no one dreamed of how many applications there would be for integrated circuits. If Cold War fears had not established the U.S. Department of Defense as a backstop buyer for any electronics innovation, Silicon Valley might never have existed.

This is not new. The history of increases in productivity through provision of public goods goes back to the flood-control and irrigation programs in the Nile, Indus, Po and Ganges River valleys of antiquity. This history includes chapters such as early modern lighthouses built without government involvement in some cases, but in such insufficient quantities that economic efficiency still suffered.

It is a history that many ignore and that is never discussed in presidential campaigns. But it has a greater cumulative effect on our lives than any individual elected to the White House in 80 years.

This story was originally published June 3, 2016 at 4:30 PM with the headline "Government can do no good, except where it can."