Saturday, August 13, 2011

Government of Infrastructure

I'm not really a very politically minded person. Like everyone, I have opinions about politics, but it isn't my day job and I don't strive to stay informed about what is happening in politics. The reality though is that politics impacts all of our lives, whether we want it to or not.

As a general rule, I don't fit into either party. I'm pretty centrist in many ways. On fiscal things I'm a bit more conservative. On social things I'm a bit more liberal. It seems odd, but in many ways the platform I often agree the most with is Libertarian. I only want government involved in the things it really needs to be involved in and even then it should be involved using the lowest level of government that works. So the federal government should get out of most of the things it does, IMO, and let state and local governments deal with those things. What is more, I think that the capitalist market can be very efficient for many, many things and where it is efficient, I think government should stay out completely and let the market do the work.

However, if I have a discussion with a "true" Libertarian, we'd argue about things like NASA and NSF which I consider to be part of the essential things that the national government needs to fund. This leads to the question of what I think is essential and why. From the above we can glean two criteria:

  1. The market won't do it well/efficiently.
  2. It has a scale/scope that needs to be national and won't be as efficient if done more locally.

So what do I think qualifies for #1? The title of this post gives away the answer. In a general sense, I consider the market short sighted. Investors want their profits today. It is hard to invest in things that won't pay off for an extended period. I have come to the conclusion that the best term for these long-term aspects of society is "essential infrastructure". What is more, I think the authors of the constitution had a similar opinion.

Why do I think the founding fathers felt this way? The Constitution is a fairly bare bones document. They really gave the majority of the power to the states. The US had just come out from under an oppressive government and they didn't want to set up a replacement for that here. Despite the minimalism of the federal government they set up, they included a federal postal system. It does stand out as a bit odd. However, I'd argue that they viewed it as the one essential piece of infrastructure for the time that couldn't be done on a smaller scale than national and couldn't be trusted to private industry.

For a nation to work, you have to be able to communicate. 200 years ago that meant a postal service. You had to be able to trust that communication and make sure it worked across state lines as well. Today the postal service isn't as essential. There are other options and, quite honestly, the free market can do it better. Things change over time. There are still essential infrastructure elements, they just look different. The interstate highway system is probably one of the best examples of a parallel to the postal service. It was a huge cost and it really needed federal government involvement to pull off. However, the ROI has been remarkable.

What about today? What are the things that the national government needs to be funding today using this selection rule? It is things that significantly add to national competitiveness in 20 years, but that don't work as well if implemented on smaller scales. It is possible to debate what should go into that, but here are my inclusions with some rational.

  • Fundamental Science Research - If you are reading this, your entire life is based on Quantum Mechanics. However, the time between the development of the theory and when there were products that could use it was measured in decades. The market doesn't do well supporting things with those turn around times. They are vital to the future progress of our society in 20-50 years though. Just like interstate highways, they are also something that works best at the national level. This is where things like NASA, NSF, and NIH (along with DARPA) come into play.
  • Science Research Education - Local governments can handle most of education. This bullet is actually tied to the one above it. The people who discover tomorrow's version of QM are being educated today. You can't know exactly what hypothesis of today will shape tomorrow. Nor can you know which students will wind up really making the big contributions. That's fine because industry needs a lot of trained researchers too and they can't afford to train them in house. This is NSF, NASA, NIH, and DARPA again. Science funding is a bit scatter shot because not everything will turn into a breakthrough. The things that don't are still beneficial to the knowledge base and hopefully they can be done in labs that are helping to train the next generation of researcher.
  • Energy/Network Infrastructure - Highways still matter, but this matters more. The market actually does a very good job with a lot of this, but this is an issue of national security and productivity. It needs some oversight and more help to give it a boost and diversify it. Our electric grid needs serious updating. Utility companies can't afford to do this. I have to admit this is something I really wish the "stimulus plan" had done something with. Giving a little boost to things like wind and solar isn't just green, it helps diversity our energy sources. Nuclear too. Fission might not be active today, but projects like NIF tie this in with the two bullets above it.
  • Air Flight Infrastructure - Here is another one I wish the stimulus plan had done. Air traffic control barely squeaks by. Most airlines barely squeak by too so you can't milk money out of them. This is still a very important part of our transportation infrastructure that crosses state borders.
Roads are still big, but I honestly think that can be left to the states in general. Don't filter the money through the federal government the way it happens now. Reduce the federal taxes and let states decide how much tax to put on things to keep their own roads up. I think this is a system that we have the technology to do much better these days, but it's a state issue.

General education is a state issue. I liked that the Obama administration put forward a national curriculum. I think such a thing is a very good idea given the high mobility of our population. That should only be a strong suggestion though and states or smaller governments should handle education issues in general. The ideas I have for this might well become my next post.

There is probably something to be said for enforcing costs of externalities, but that's not going to fit into this post.

What you'll notice is missing is entitlements. They are a huge chunk of the current federal budget and I honestly think they should be axed. I do believe some form of entitlements are required.  The future I see with automation making many people unemployable will require this.  However, that isn't an issue for the federal government and they should get out of that business.  Then we can have 50 states "playing" with possible ideas.  Actually running different experiments will go a long way to figuring out what works.  What is more, I'm guessing this isn't a problem with a single solution. Texas and North Dakota could very well need different solutions to this.