Thursday, July 11, 2013

False rumor, prejudice, blind spots 5: Trap of public construction projects 2

This time, I show the original purpose of the public construction, and a substitute plan having higher effect.

Essence of public construction
For example, a government pays 10 trillion yen to 2 million people who were employed in order to dig a hole and fill in same hole for one year.
In fact, the effect to reduce an unemployed person is the same as traditional unnecessary dam construction or roadwork.
If the built infrastructure has value, in addition, it is good.

With the following examples, let's check the value that should be produced by the public investment.




For example, a government pays salary to jobless people who were employed in order to do care and child rearing at their home.
Is there any merit?
There are five merits compared with public construction.
*If child rearing is helped, youth population in the future increases by the rise of a birthrate and it will bring good influence to economy and welfare.
Furthermore, woman's advance into society will be urged and national income per person will go up like Northern Europe.

* Since it is the payment to their home, it becomes an instantaneous effect, a decrease of an indirect loss, and a decrease of an import price.
Moreover, paying to low-income group that have higher consumption rate is high in economic effect.

* This labor is possible to combine with the traditional domestic labor, and a minus of the value is almost nothing.
Although the domestic labor does not appear in calculation of national economy, such as GDP, it has very big value.
In labor of public construction, this domestic labor becomes impossible and it is minus of the value.

* Like public construction, there is neither the removal of residents nor the waste of resources; therefore there is no minus of social value.

* Like public construction, the contractor is not biased to specific business, and the effect spreads evenly.

This example is thing that shows a way of thinking, but I am happy if you understand a fault of the traditional investment (public construction projects).
GDP and the economic growth rate are important indexes, but it is not all.



The purpose that the government uses valuable fiscal resources is to decrease the unemployment rate.
In addition, the purpose must be to produce the social value, and to produce the good circulation of it.
Though a financial policy is for it, there are a lot of effective means with the exception of the public construction projects.
The accumulated deficits only increase by repeating useless public construction.


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