Are the folks at NM’s BBER “Bad Economists?”

One of my favorite economics quotes is from the Frenchman Frederic Basiat who says, “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

Nowhere is that more true than in a recent report that, according to reporting from Winthrop Quigley of the Journal, federal “cuts” could cost New Mexico 20,000 jobs by 2014. Leave aside the fact that sequestration will not actually “cut” anything in the federal budget (as seen in the chart below).

The fact is that reducing the growth of federal spending (or even cutting it) will free up resources for more productive uses. That is the “unseen” aspect of economics. Sure, anyone can see news reports of layoffs at the Labs and automatically assume that New Mexico’s economy is in deep trouble, but those resources (including human resources) will then be freed up for more economically-valuable uses in the private sector.

Now, it is true that New Mexico — especially if it remains so economically-unfree — may lose out to other states. That is the kernel of truth in the BBER report. But, who is to say that Gov. Martinez will not succeed in pushing a pro-growth economic agenda through the Legislature that makes New Mexico a more attractive place for business and leads our state to free market economic prosperity?

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13 Replies to “Are the folks at NM’s BBER “Bad Economists?””

  1. To get a real economy going you have to get past the green, AGW zombies who think wind and solar will do it while saving non threatened species like to Desert Dune Lizard.

  2. We could always try freedom, after all freedom has never fail to out produce every other idea. Look around and see if you can name anything the government has touched that is not higher in price and poorer in quality. Schools, no, not schools. Medicine, no, not medicine. Drugs…

  3. Excellent analysis and conclusion, not that your insights will have much effect on policy makers who are denzens of the political class and not interested in real economic truth.

  4. A cut will not necessarily “free up” anything for “more productive uses”. The money will no doubt go elsewhere, but where depends on the decision makers. Further, Mr. Gessing should consider the multiplier effect (an effect I am sure all these conservative commenters must understand, given their economic expertise) of money comiing in from outside the state and its effect on the state economy. Simplistic economic analysis, in my opinion (not BBER or Quigley, by the way)

    1. If the money goes elsewhere (as in staying in the private sector), it will by definition be put to more efficient use.

  5. Mr. Gessing needs to define economic efficiency (since he said “by definition” the private sector is more efficient – Even a private sector Monopoly, Mr. G?). If there are personell cuts in government positions there is no particular reason any of these people will stay in the state, so if they are freed up for more productive uses (I guess by that definition working as a clerk at Santa Fe Walmart is more productive than a being a physicist at Los Alamos or a physician at the VA or a (public) University Prof.) the more “productive” activity, or any job for that matter, may well be out of state. There will no longer be money coming into New Mexico for these jobs so we will additionally lose the multiplier effect an in jection of outside dollars provides, even more devastating to our economy.
    By the way, I am not arguing that private sector jobs are never more “efficient”, but just not always, and that doing so may be a bit simplistic.

    1. Economic efficiency means putting limited resources to their highest and best use. This is done more effectively on a voluntary basis where the individual is able to decide how resources are allocated. Government which must rely on taxes and expropriation (done on an involuntary basis) cannot allocate resources as efficiently.

    2. Perhaps the more simplistic approach is to focus ones gaze towards Federal Government inflows to one state vs. another, and then limit our projections to the resulting multiplier effects of those same inflows within that single state. Although, this misses the entire point of a comparison of the multiplier effects of many individuals using these same funds without, government involvement, versus the comparative multiplier effects of a government’s use of the funds on behalf of many individuals. If this is to be our sole focus, then it simply boils down to nothing more than a free-for-all, in relation to one state’s ability to appropriate Federal funds, which might have otherwise gone to another state? The proverbial “zero sum game”, with one big, federally controlled pie that politicians are more than willing to divvy up amongst friends (Perhaps like a pack of wild Hyenas fighting over a carcass, or whatever’s eventaully left of one?).

      However, and if we widen our gaze, then we would not only attempt account for the efficiency of the Federal inflows themselves, but the resulting efficiencies, or inefficiencies, relating to their actual source.

      Are you claiming that the Federal Government is a more efficient conduit for the allocation and use of these resources than the individuals who generated the actual resources (tax dollars) themselves? Are the states much better at it…or, are you relating this “efficient” creation and use of capital to something more akin to quantitative easing? Either way, I would argue that both concepts are the major contributors to the overall delusion of the entire Nation’s capital and capital use efficiency. And, it’s a pretty easy argument to make.

      At a national level, or any level for that matter, is it efficient to allocate and flow more funds than those which have actually been generated within a given appropriation period (Debt and Deficit spending), and within a more competitive “global” economic environment? What are the longer term cumulative effects of such an economic expansion strategy? Is debt service an efficient use of funds, relative to the returns on the indebted funds invested/allocated by Government, all things held equal? Does a diluted national currency provide for a more efficient return of value on these same funds use, over time? What exactly does any currency actually represent…the value of what, created by whom?

  6. Well, I wrote another comment to Mr. Gessing´s response to my implication that he was the bad economist, if you want to consider him an economist, day before yesterday which never got printed. Tough internet editorial policy – printing controversial material and then not airing the responses when there is plenty of room here.

  7. Sorry, I missed the printing of my comment above. My bad and apologies to RGF.

    So to Mr. Gessing, paying a private drug dealer, who responds to supply and demand in the market place for illicit drugs (government regulation of heroin is unnecessary, after all, and bad economics), is a higher and in factthe better use for my money than the same dollars coming out of my taxes for a public health clinic, or a public university, or road repair or garbage collection by a public entity. I know a number of people around the University, a number of them conservatives, who would definitely use their tax rebate to buy weed (higher and better!). Somebody should read the economic literature on public goods.

    Noonballoon calls struggling for US government money in New Mexico a zero sum game (which ignores the fact that we would still be losing out on billions in our economy – not theoretical, noonballoon!) while analogous struggling for clients by private business is in fact Mr. Gessing´s best and highes use of $$$ and far from a zero sum game.

    1. I believe that it was you who alluded to this as a zero sum game…at least that’s the premise of your comments. Although, I doubt that anyone’s shocked to know that you “know a number of people around the University who would definitely use their tax rebate to buy weed”. I’m sorry but it does beg the question: would you call yourself a conservative, and what will you be using your tax rebate for, John?

      Originally, I was under the impression that you might wish to consider a more egalitarian perspective of the bigger picture, which would account for all states, as those who live in them. And if that were the case, then you might also wish to consider the overall inefficiency, waste and corruption, and everything that comes with those things, that trillions of dollars of expanded and continuous Federal Government deficit spending tends to bring to the table, not to mention the resulting free-rider mentality that is developed within their wake. But it sounds like your pragmatism leans more in the direction of the Government’s ends justifies its means, for all.

  8. Nope, Noonballon, you are just
    1. showing a real ignorance of macroeconomics in your first missive. Go back to school.
    2. making a lot of grandiose assertions completely unsubstaniated (actually I like the “more egalitarian” comment but you need to look at history and how we got here in the first place)
    3. attacking me with stereotypes because my pointing out your ignorance seems to imply to you that I am on the “other side”.
    4. No dude, reread your own words. You used the “zero sum” comment. And by the way, arent Ron Paul and Gary Johnson for drug policy liberalization?
    Anyway, I got no more time to educate you. When economics is a religion for people you cant have a sensible discussion (Higher and Better!)

    1. Thank you, John. You’ve broken this down by number, and will happily follow suit in my response:

      1.) Ignorance is what you are attempting to preach… from your own teachings no doubt. Try to open your mind to all perspectives, not just the ones that “you like”, from your own perspective.

      2.) While I would agree with you that history is important, I’m more concerned with the present and future implications of the real roots of “egalitarian” concept. It’s too bad that the term is so often high jacked by those would twist it as argument for the actual unequal and opposite “means”, such as wealth redistribution, of Big Brother, but I would expect no less from a good “University” man, these days.

      3.) Relaaaxxx, John…no one is attacking you. I’m assuming that we both want what’s best for each and every individual, regardless of social status or political connection. But if makes you feel better then please, by-all-means, continue to point out my ignorance, without substantiation, and attempt to link the conservatives that “you know” to things like illicit drugs.

      4.) Again, “Zero-Sum-Game” describes “your premise” and your comments, to the letter, as I have already explained to you in relative detail and provided an example for (remember the Hyenas, John). And, while I can’t speak for Ron Paul, or Gary Johnson, I would venture a guess that they believe that the related failure and social destruction of the so called “Drug War”, not to mention the opportunity cost in relation to resources that have been used for several decades now to prosecute it, only serves to further demonstrate the inefficiency of massive Government interventions, which continue to provide the incentives to promote the exact opposite of the actual desired effect. We could certainly explore the available data and some opposing examples of these policies, if you’d like.

      5.) You may not “have any more” time for me, but I’m always willing to make the time to educate you, Minister Keynes…just let me know when you’ve come down from your high…………horse.

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