During the round of “stimulus” spending two years ago, federal bureaucrats figured out how to stimulate the sign industry. They instructed states to spend millions of dollars for signs to post on highway projects telling motorists that the projects are funded by “stimulus” spending.
The example is outrageous, but it’s symptomatic of bureaucratic political thinking in monopoly situations. Getting the job done in the least expensive possible way wasn’t the priority. Clearly, the priority was delivering a political message. Although nobody can put a dependable figure on the cost of all those politically motivated signs, it’s clear that they cost millions of dollars — but why would anybody worry about spending small change like that?
Actually, many mainstream (Keynesian-influenced) economists wouldn’t complain about the cost. They’d say that the spending employs sign makers and installation workers — who pay taxes and spend their income — so it “obviously” has a “stimulative” effect. That’s the Keynesian theory that led the Fed and the U.S. government to pour money down various ratholes in the past few years.
Is all of the “stimulus” spending the equivalent of paying people to dig ditches and refill them (or post signs with a useless political message)? Of course not. Some sizable percentage of it ends up being spent for things that are nice (or at least, sort of nice) to have. Some roads get repaired or expanded. Some downtown areas get spruced up. Some playgrounds get built. It’s not bad stuff, but the things that are seen are just part of the story. What’s unseen is the part of this story that nobody talks about — and it’s a point that French writer Frederic Bastiat famously made in his 1850 story about a broken window. (Please take three minutes to read Bastiat’s story. It will help you understand the rest of what I have to say.)