Ok, the title is a bit over the top but . . . well suck it John Maynard Keynes:

Quote :

"DOES pork-barrel spending stimulate business? You might have thought that, whatever their impact on the overall economy, earmarks and the rest would at least boost the fortunes of the well-connected. Indeed, a trio of academics at the Harvard Business School, Lauren Cohen, Joshua Coval, and Christopher Malloys, based a recent research project on exactly that assumption. They looked at the impact of powerful politicians (heads of spending committees, etc) on local economies, fully expecting that impact to be positive. But the result of their efforts astonished the researchers, as it astonishes me. The academics discovered, in effect, that federal spending causes local businesses to shrink. The more access a state has to the federal pump in Washington, DC, the more private companies wither on the vine."

http://www.economist.com/blogs/schumpeter/2010/06/evils_pork-barrel_spending

6/9/2010 6:46:07 PM

An interesting study for sure.

IBT the classic TWW correlation != causation arguments (wouldn't you say there are other factors that could be affecting the businesses besides their state's senator becoming the chair of a commitee?)

Also they said they found the effect was largest when unemploytment was low. Doesn't Keynesian thinking only advocate for large government spending during recessions?

I don't have time now, but I'll prob read the actual study later this week.

6/9/2010 8:07:18 PM

Yeah, I found this backstage, an over-sized hat. It's funny.


It's funny because it's ah, bigger than, ah... you know, a normal hat.

6/9/2010 8:12:47 PM

^^ All valid points, and yes Keynes advocated for government spending when, at least when he felt, that the free market was failing to maintain full employment. I only glanced over it during my lunch but this sums that up somewhat:

Quote :

"A: Our findings suggest that they should revisit their belief that federal spending can stimulate private economic development. It is important to note that our research ignores all costs associated with paying for the spending such as higher taxes or increased borrowing. From the perspective of the target state, the funds are essentially free, but clearly at the national level someone has to pay for stimulus spending. And in the absence of a positive private-sector response, it seems even more difficult to justify federal spending than otherwise."

I'll be interested in digging into it deeper, I'm just tired of the indefatigable ghost of JMK rearing his head every time a politician needs an "educated" excuse to blow through taxpayers' dollars to secure his reelection through patronage.

6/9/2010 8:27:59 PM