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Author: aleax Big gold star, 5000 posts Top Favorite Fools Global Fool Pro Community Winner Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 465323  
Subject: Re: VW Chattanooga blowback Date: 2/25/2014 12:37 AM
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BTW the bridge to nowhere was in a period of corruption.

While I use the colorful phrase in question, I use it to stand for all sort of infrastructure builds that aren't very useful (if at all) except maybe for their fleeting demand-side effect. Japan for 20+ years offers the most striking example -- I suspect they may have spent more on useless infrastructure than the rest of the world, without noticeable positive effects (and as a result their public debt as % of GDP dwarves other notorious debtors', like Italy).

Of course there have likely been cases of corruption during Japan's huge, prolonged "useless-infrastructure splurge" (as essentially always when lots of public contracts are awarded and public money disbursed), but that was far from the motivation -- which was strictly one of misplaced belief in the magical effect of demand-side stimulus from infrastructure builds, ignoring the meager, non-existent, or negative supply-side of things.


There is a clear difference in good policies and bad policies.

In hindsight, sure; hindsight is, notoriously, 20/20. When decisions urgently need to be made, esp. in emergencies, not so much. Was letting Lehman fail a good or bad policy? At the time many pundits praised the Treasury and Fed for the courage of wiping out shareholders, management, and creditors, rather than doing a "bail-out". Now the consensus appears to be that it was a tragic mistake. Hindsight...


We need long term higher GDP growth based on a rising middle class. That is demand side.

Not exclusively. For example, reforming education to improve society's overall productivity is a supply side policy that many believe to be part of the mix (I concur up to a point but without subscribing to the enthusiasts' extremes, as I think they ignore the fact that some of the value of education is as a "positional good" which vanishes if everybody gets equally good education -- which they should anyway, for justice as well as for the social benefits, but won't be the hoped-for panacea).


Policy is not the relations of supply and demand charts.

Of course not -- it's the attempt to influence demand and/or supply in desired directions. That doesn't make the macro-economic models useless or irrelevant -- while far from perfect, they do come in useful in (to some extent) predicting likely effects of a certain event, phenomenon, or policy.
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