Over at The G.
Apparently \”crowding out\” is just so passe.
Old fashioned nonsense. This dismissal comes from Aditya Chakrabortty…aqnd he\’s the peep who writes the Guardian\’s economic editorials. Which might explain how some of the Guardian\’s economic editorials end up quite so far off planet.
Because crowding out is rooted in the obvious and fundamental idea of opportunity costs. If something is being used for one purpose then we cannot go off and use that same thing to do something else.
If the government is employing labour to produce green energy then we cannot use that same labour to tend to the elderly. It\’s exactly the same argument as \”jobs are a cost, not a benefit\”.
So of course crowding out happens.
The much more interesting and important question is the one that comes after this admission: is it important? How large is the effect, is what we\’re losing by having government do this over here worth more than what we get by government doing that over here?
For as ever, the cost of getting something is what we give up to get it. And this requires a case by case examination of what we are getting and what we\’re giving up to get it. And this applies not just to employment of assets, the deployment of tax revenues, the deadweight costs of their collection but also to regulation.
For example, the jams, jellies, marmalades and sweet chestnut purees regulations (as amended 2004) protect us from the horrors of jams (and jellies!) made with essential oils of citrus. An important protection some might argue: the same regulations also make the sale of pineapple marmalade (no, me neither, but apprently it\’s a condiment in Southern US cooking) illegal.
Is that cost worth that benefit?
In short, of course crowding out happens: the question is whether it\’s worth it or not.