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Post Secondary Degrees and Economics

Good2Golf

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Our landscaper who has grown his business in the area significantly, many of his clients being PS/RCMP/CAF, would take issue with HiTechComms opinion that Government expenditures (including salaries) do not create ‘wealth.’
 

brihard

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Our landscaper who has grown his business in the area significantly, many of his clients being PS/RCMP/CAF, would take issue with HiTechComms opinion that Government expenditures (including salaries) do not create ‘wealth.’
I suspect by 'create wealth', he means 'add value'. We could take Heinlein's example of an apple and other basic ingredients of modest value that, in the hands of a skilled baker, can be made into a much more valuable confection- or, alternatively, burned and made worthless when previously they could have at least been a mediocre snack. The same concept can be applied to any sector by which physical materials are turned into more functional or valuable products.

Of course- even that is illusory, because really what has happened is that a thing has been created whose value will attract discretionary spending from something else. If I choose to buy a new iPhone, that money won't go to someone else. Not directly from me, at least

To follow it from there, of course- what REALLY matters is the circulation versus accumulation of wealth. If I work my 'unfunded liability' public sector job and I spend the bulk of my discretionary income, that contributes to the economy. Discretionary spending lets your landscaper, or my housecleaner, or daftandbarmy's manicurist then receive a bit of that wealth and turn it to their purposes and forward it along to the next economic activity.

So, while these jobs may not 'create wealth' in the sense of creating or enhancing the value of goods, we certainly do provide a service to someone who chooses to pay for it- some level of government, in this case. When we get paid for that service, and when that pay exceeds the bare minimum necessary to live off of, now we're able to inject more of that into the economy, accelerating the circulation of capital that turns into wealth in real terms.

The concept of 'wealth' as being, largely, the purported market value of things like real estate, mutual funds, precious metals, etc, is a bit deceptive. It's fine for me to say my house is worth $500k, or that my mutual fund portfolio is worth $80k. that doesn't do anything or mean anything for anyone else unless I accept to use it, to convert it to something else. So sure, call it 'wealth', but watch what happens if too many people try to convert similar 'wealth' assets at once. If Jeff Bezos or Elon Musk were to try to sell most of their stock tomorrow, what do you suppose would happen to the value of that stock?

So yeah, when someone says that any given job or sector 'creates wealth', it can be fun to drill down and discern what is really truly meant by that. The most accurate thing it can mean is probably that it accelerates the circulation of capital through an economy- the same $20 passing through 5 pairs of hands does more than if it only passes through 3. I would contend that the discretionary spending of an engineer, architect, or doctor is of no greater or lesser economic value than the discretionary spending of a firefighter, social worker, or teacher.
 

ballz

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That's a whole lot of Keynesian drivel.

"Circulating money" doesn't create wealth. As humans, we consume things (let's just keep it simple with food). If you just circulated money around, we'd eventually have no food. Someone actually has to generate wealth i.e. go out and catch a fish. "Circulating money" would actually be a sign that we're in for trouble. Hmmm, maybe that's why we keep having recessions and have to go print money as a result.

Economic growth is stimulated by people investing (taking risks) to make things more efficient so that they can sell it for cheaper than their competitors. Not just "spending." "Spending" is what all the academics tell you to do when we have a recession, and for some reason seem continually surprised that we keep having them as soon as the money printing machine gets turned off. The broken windows fallacy demonstrates how stupid this idea is pretty adequately.

Have you noticed China having any recessions? Their GDP grew by over 6% during the 2008 global recession. We've only seen 6% GDP growth like once in the last 50 years maybe??? That's because China is investing in making things more efficiently so they can sell it for cheaper than their competitors...

Public sector jobs are a drain on the economy precisely because of the above... they suck up resources that could otherwise be invested in being more competitive (i.e. developing a new piece of technology). Taxes make it harder to save and invest in these types of things. It doesn't mean they aren't necessary, it doesn't mean they don't support the economy (as I said, they're more like a defensive measure to prevent economic destruction). But they don't generate wealth any more than a soccer goaltender generates offense. And the dangerous thing here about how confused we clearly are over basic economics is that we try and win a soccer game by having 11 goaltenders instead of 1 goaltender and 10 players.

"How an economy grows and why it crashes" by Peter Schiff should be mandatory reading in Grade 10.
 

Colin Parkinson

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Part of what a Public Service is meant to do is to ensure the orderly circulation of wealth. It does so by ensuring that certain things can be relied upon. Such as scales and measurements of goods. That companies process food in a safe manner, goods are moved in a safe manner. Most of us go through the day assuming a bridge will not collapse under them, that the fuel pump will give them exactly 40L of gas and that the food they buy for dinner is unlikely to kill them.
Proper enforcement of regulations also means that it should be a level playing field for all businesses, that a conscientious business can offer a good service, with less fear of being undercut by a unscrupulous business which puts it's employees and customers at risk. The challenge is for Public Service/regulators and politicians to know what is the perfect balance of regulation and non-regulated activity. To much either way creates both short and long term issues that generally falls into the lap of the taxpayer to fix.
 

FJAG

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I presume what we are talking about here is whether or not the economy is enhanced more by way of the multiplier effect running through the government via, amongst other things, civil service salaries or by virtue of leaving the money in the hands of the taxpayer to spend as he sees fit.

I'm not so sure if "wealth" is the issue here because the accumulation of wealth by way of savings rather than investment curtails the multiplier. It's the continued circulation that makes the difference. I think that the jury is somewhat out on whether or not taxes per se push the multiplier. One thought is as follows:

Several empirical studies have attempted to quantify the various effects noted above in different ways and used different models, yet mostly come to the same conclusion: Long- persisting tax cuts financed by higher deficits are likely to reduce, not increase, national income in the long term. By contrast, cuts in income tax rates that are financed by spending cuts can have positive impacts on growth, according to the simulation models.
Brookings: Effects of Income Tax Changes on Economic Growth

I take it from that that real tax cuts as a result of real reduced government spending and leaving income in the hands of the taxpayer results in a higher GDP through multipliers than if the same money is run through the government as spending of whatever character, including civil service salaries.

I presume other studies might differ.

🍻
 

brihard

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That's a whole lot of Keynesian drivel.

"Circulating money" doesn't create wealth. As humans, we consume things (let's just keep it simple with food). If you just circulated money around, we'd eventually have no food. Someone actually has to generate wealth i.e. go out and catch a fish. "Circulating money" would actually be a sign that we're in for trouble. Hmmm, maybe that's why we keep having recessions and have to go print money as a result.

Economic growth is stimulated by people investing (taking risks) to make things more efficient so that they can sell it for cheaper than their competitors. Not just "spending." "Spending" is what all the academics tell you to do when we have a recession, and for some reason seem continually surprised that we keep having them as soon as the money printing machine gets turned off. The broken windows fallacy demonstrates how stupid this idea is pretty adequately.

Have you noticed China having any recessions? Their GDP grew by over 6% during the 2008 global recession. We've only seen 6% GDP growth like once in the last 50 years maybe??? That's because China is investing in making things more efficiently so they can sell it for cheaper than their competitors...

Public sector jobs are a drain on the economy precisely because of the above... they suck up resources that could otherwise be invested in being more competitive (i.e. developing a new piece of technology). Taxes make it harder to save and invest in these types of things. It doesn't mean they aren't necessary, it doesn't mean they don't support the economy (as I said, they're more like a defensive measure to prevent economic destruction). But they don't generate wealth any more than a soccer goaltender generates offense. And the dangerous thing here about how confused we clearly are over basic economics is that we try and win a soccer game by having 11 goaltenders instead of 1 goaltender and 10 players.

"How an economy grows and why it crashes" by Peter Schiff should be mandatory reading in Grade 10.
Not sure your position is strengthened by reliance on China as a comparitor. While you admire their GDP growth and simply chalk it up to ‘investing in efficiency’, you’re ignoring how badly out of sync their labour standards are with ours. Developed first world economy versus an autocracy built on sweatshop labour and barely constrained or regulated resource extraction (compared to the developed world) is not even close to an apples to apples comparison.

Picking a country where the public and private sectors are so corruptly intertwined, where the military is literally employed as labour and runs factories, where minorities and dissidents are engaged in forced labour as a state policy, and where both the environment and human working conditions are blatantly disregarded is not going to lend itself to a fair comparison against us. No shit they hit 6% GDP growth. When their exploitation of human capital is so very i constrained as it is, of course they’ll achieve what, numerically, can be called ‘efficiency’.

Deride the circulation of capital all you want, but you’re throwing out some hard realities here. You can build, craft, fix, or import whatever you want, but without buyers, you have problems. And as others have already neatly addressed, a broad public sector seems to be a common factor in developing societies where the mechanisms and systems that facilitate all of these exchanges can be relied upon. Your patents and IP are protected, your employees and healthy and educated, your facilities likely are not subject to an outlandish crime or fire risk, your access to financing is pretty predictable if you have a sound business model, you can count on your electricity and plumbing... And so on and so forth.

it seems from looking at what the most developed and prosperous countries in the world actually are, that a robust public sector seems to be a necessary component of that total society.
 

Good2Golf

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That's a whole lot of Keynesian drivel.
whether you call it Keynesian economics, macroeconomics, whatever...there are most certainly elements of worth of the multiplicative effect of re-investment, no matter what you want to call it. Money spent on people, whether public servants or not, would only be of no value to the economy if they immediately took that money and physically destroyed it...ie. burning cash. Even burning earnings in the form of cigarettes provide value to the retailer that sold the cigarettes.

"Circulating money" doesn't create wealth. As humans, we consume things (let's just keep it simple with food). If you just circulated money around, we'd eventually have no food. Someone actually has to generate wealth i.e. go out and catch a fish.
So wealth is only created by distributing things that someone collected (fish, plants, etc.) and then charged money from others to acquire? Again, my landscaper who has grown his business (capital/equity) would beg to differ with you. You also haven’t addressed the value of services to an economy. Do you think that only goods, and the most cheaply produced, are of any value to a nation’s economy?

"Circulating money" would actually be a sign that we're in for trouble. Hmmm, maybe that's why we keep having recessions and have to go print money as a result.


Economic growth is stimulated by people investing (taking risks) to make things more efficient so that they can sell it for cheaper than their competitors. Not just "spending."
Entrepreneurs take risks; they invest in ideas, not just ‘making something cheaper.’ Again, what about services as well as (the cheapest) goods

"Spending" is what all the academics tell you to do when we have a recession, and for some reason seem continually surprised that we keep having them as soon as the money printing machine gets turned off. The broken windows fallacy demonstrates how stupid this idea is pretty adequately.
Dick Cheney would disagree that your broken windows fallacy is a slam dunk. Your ‘proof’ of refuting spending as a means to contribute to an economy is no more valid than your wholesale dismissal of Keynesian macroeconomics.

Have you noticed China having any recessions? Their GDP grew by over 6% during the 2008 global recession. We've only seen 6% GDP growth like once in the last 50 years maybe??? That's because China is investing in making things more efficiently so they can sell it for cheaper than their competitors...
So a race to the bottom of profitability and gross margin is a characteristic of true wealth? I see you conveniently took only the absolute value of China’s GDP, and not the per capita value...so disproportionate contribution of sweat equity to GDP is also an important element of the wealth of any society?

Public sector jobs are a drain on the economy precisely because of the above... they suck up resources that could otherwise be invested in being more competitive (i.e. developing a new piece of technology).
So if we fired all the public servants and a government stopped providing any services, including law enforcement and Defence, out economy would leapfrog past all other nations’ economies? What’s your view of governments’ role in advancing technology; say for instance all those public servants in the US who participated in the space program (NASA employees are
Public Servants free all) and the government funding to develop technology to support it? Or government money spent on technology to creat a multi-nodal electronic data communications network and the spin-off benefit that civilians around the world derived from such government initiated investment? There are more than a few
employees of industry who continue to generate their own wealth primarily through multiple governments’ expenditures.

Taxes make it harder to save and invest in these types of things. It doesn't mean they aren't necessary, it doesn't mean they don't support the economy (as I said, they're more like a defensive measure to prevent economic destruction). But they don't generate wealth any more than a soccer goaltender generates offense. And the dangerous thing here about how confused we clearly are over basic economics is that we try and win a soccer game by having 11 goaltenders instead of 1 goaltender and 10 players.
Taxes being purely a ‘defensive’ measure by a government to uniquely keep its economy from faltering is an interesting perspective of economic theory...perhaps you have some reviewed material (preferably not from FIFA) to provide greater insight?

"How an economy grows and why it crashes" by Peter Schiff should be mandatory reading in Grade 10.
Just to confirm, is this the same Peter Schiff who recommended an U.S. VAT to replace all federal and state taxes as a means to support economic growth? I though you said that taxes are only a defensive measure, not an offensive growth measure? Personally, I’d lean towards Maynard Keynes before the likes of Schiff, when it comes to economic theory and practice. Like him or not, there is general acceptance of his macroeconomic theories.

regards
G2G
 

ballz

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Picking a country where the public and private sectors are so corruptly intertwined, where the military is literally employed as labour and runs factories, where minorities and dissidents are engaged in forced labour as a state policy, and where both the environment and human working conditions are blatantly disregarded is not going to lend itself to a fair comparison against us. No shit they hit 6% GDP growth. When their exploitation of human capital is so very i constrained as it is, of course they’ll achieve what, numerically, can be called ‘efficiency’.

All of that just avoids the point. There are lots of countries with poor labour standards, human rights violations, authoritarian governments, etc. who haven't been experiencing explosive economic growth for the last 40 years. China used to have all those things before they became the fastest growing economy in the world, and they still do, so what do you think changed which caused such drastic growth since the 80s? (hint: it involves China "opening" for business, the private sector, and a whole lot of increased production as a result)

Economic growth is really just an increase in what you are producing / selling. You can increase production by increasing the amount of people working (like the west did during/after WW2 when women started entering into the workplace) or you can become more efficient with the workforce you have (which ultimately is a result of technology and innovation... driven by a company's desire to be better than their competitor so they can sell more).

Even Keynes' ideas about "spending" to "stimulate" the economy were based around actually investing in something at the very least, not "circulating money." I.e. Investing in infrastructure while prices are low, which will lead to greater efficiencies for the private sector. Somehow people have morphed that into thinking building a bridge to nowhere creates economic growth just because it "injects cash into the market" when it creates some temporary jobs.


whether you call it Keynesian economics, macroeconomics, whatever...there are most certainly elements of worth of the multiplicative effect of re-investment, no matter what you want to call it. Money spent on people, whether public servants or not, would only be of no value to the economy if they immediately took that money and physically destroyed it...ie. burning cash. Even burning earnings in the form of cigarettes provide value to the retailer that sold the cigarettes.

Ummm nope, if you provide someone money and they do nothing except consume it in exchange, you essentially have burned your money. You're obviously married to the idea that "spending" just automatically leads to economic growth, please demonstrate it. The broken windows fallacy demonstrates otherwise quite aptly.

So wealth is only created by distributing things that someone collected (fish, plants, etc.) and then charged money from others to acquire? Again, my landscaper who has grown his business (capital/equity) would beg to differ with you. You also haven’t addressed the value of services to an economy. Do you think that only goods, and the most cheaply produced, are of any value to a nation’s economy?

That's one hell of a leap away from what I said.

Entrepreneurs take risks; they invest in ideas, not just ‘making something cheaper.’ Again, what about services as well as (the cheapest) goods

You're just being argumentative because you're insulted by this idea that public sector doesn't grow the economy. This point is just you trying to nitpick something. Entreprenuers are trying to provide more value than their competitors. Even if their selling point is "quality," (selling at a premium price), they're trying to sell quality at a cheaper premium relative to the value they are providing, so that you choose their product and not their competitors.

What about services? It's the exact same thing. They need to provide the most value to be competitive. They want to find cheaper and more efficient ways to doing things. Does your landscaper expect to make any money if his price is twice as high as his competitors? Has he not invested in some tools so that he can do his job more efficiently, and therefore offer a lower price than he otherwise could?

Dick Cheney would disagree that your broken windows fallacy is a slam dunk. Your ‘proof’ of refuting spending as a means to contribute to an economy is no more valid than your wholesale dismissal of Keynesian macroeconomics.

Lol, okay, Dick Cheney disagrees with me. That's a real compelling counterargument. (y)

So a race to the bottom of profitability and gross margin is a characteristic of true wealth? I see you conveniently took only the absolute value of China’s GDP, and not the per capita value...so disproportionate contribution of sweat equity to GDP is also an important element of the wealth of any society?

Like I said, you're just being argumentative. You should at least check to see whether your counterargument makes any sense. China's GDP per capita has grown exponentially since the 80s as well. In 2008 it grew by 28%.

It's unfortunately too convenient for you guys to dismiss their insane economic growth by chalking up to their cheap labour, as if they didn't have all that in the 1950s when they were practically a third world country and had a GDP comparable to Canada's.

What’s your view of governments’ role in advancing technology; say for instance all those public servants in the US who participated in the space program (NASA employees are
Public Servants free all) and the government funding to develop technology to support it? Or government money spent on technology to creat a multi-nodal electronic data communications network and the spin-off benefit that civilians around the world derived from such government initiated investment? There are more than a few
employees of industry who continue to generate their own wealth primarily through multiple governments’ expenditures.

Like I said, there's two ways to create economic growth. Add more people to the labour force (which just creates absolute growth as you mentioned) or producre more with the same amoutn of people (become more efficient through technology / innovation).

Government contributions to technological advances certainly do increase economic growth, and so would government stimulus if it was spent in a manner that makes sense like Keynes had suggested (such as infrastructure that creates efficiency) and his followers have ignored whilst pissing government money up a tree (like on a bridge to nowhere).

Just to confirm, is this the same Peter Schiff who recommended an U.S. VAT to replace all federal and state taxes as a means to support economic growth? I though you said that taxes are only a defensive measure, not an offensive growth measure? Personally, I’d lean towards Maynard Keynes before the likes of Schiff, when it comes to economic theory and practice. Like him or not, there is general acceptance of his macroeconomic theories.

Not aware of his arguments about VAT, although I would completely agree with that. It's well known that VATs are far more efficient than almost all other forms taxes, the problem is not the tax method but that it's politically unpopular. Perhaps you might want to learn about them and why he's making that argument, since you seem to fall into the camp of having dismissed the idea without fully exploring it.

You can side with the Keynesians all you want. I'd say Schiff is clearly up on the scoreboard when it comes to predicting where the economy is going.
 
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brihard

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It’s weird that you seem to think we’re talking about stimulus spending. Take a breath, read back over the thread, and you’ll see that we’re not. I believe G2G and I were countering a rather blanket dismissal of there being much if any economic value or utility in the public sector and the ‘fuzzier’ things found in education. It’s also funny that you think anyone here is insulted by a differing opinion on the value of the public sector. I assure you I’m not, and I know G2G to be well outside the arcs you seem to be assuming he falls in, so I doubt he is either.

Regarding China- absolutely they opened their markets, began moving up the ‘value added’ chain... But their comparative advantage is still very heavily rooted in cheap labour, and in lacking many of the constraints on growth that make countries less crappy to live and work in. You’re choosing to ignore this.

Certainly they are not where they were 50 or 60 years ago. They have their own massive consumer sector now, in both goods and services, and more of their economic activity comes from internal circulation, not just being able to run a massive trade surplus. As their economy matures, as wages increase and as there is greater demand for labour standards to increase, growth will slow somewhat. And, while concentration camp slave labour is a proportionately small part of the work force, let’s not ignore that that’s an obfuscating factor in your comparison too. Living in a society worth being proud of necessarily involves some sacrifices in efficiency.
 

ballz

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It’s weird that you seem to think we’re talking about stimulus spending.
Hmmm, ya, I wondering where I got that idea when your argument is that as long as we're spending money, that's good for the economy...

what REALLY matters is the circulation versus accumulation of wealth. If I work my 'unfunded liability' public sector job and I spend the bulk of my discretionary income, that contributes to the economy.

This could not be more of an argument in favour of stimulus spending, and it's completely wrong.

I believe G2G and I were countering a rather blanket dismissal of there being much if any economic value or utility in the public sector

Well, take a breath, a re-read what he wrote, because that's just a complete mischaracterization of what he said:
As for Long term unfunded liabilities, I was referring to public sector jobs. They are service for the public but they add no wealth to the economy.

He's entirely right, they don't add wealth, but like you said:

"Living in a society worth being proud of necessarily involves some sacrifices in efficiency"

Your sentence admits that they are a drain on the economy, and I agree, they are (to some extent) necessary / "worth it" .... but most important is not to lose site of that nuance, or else we might come to the incorrect conclusion (which many clearly have) that blind government spending creates economic growth.
 

tomahawk6

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I speak to my experience but a Masters degree in management is important for a Major/LTC . Its no guarantee that the officer is competent. This has spread to the senior NCO ranks.
 
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