The fun stuff starts

Time magazine reports on administration thinking behind the stimulus package:

In the words of Vice President Joe Biden, Obama's effusive Recovery Act point man, "Now the fun stuff starts!" The "fun stuff," about one-sixth of the total cost [of the stimulus package], is an all-out effort to exploit the crisis to make green energy, green building and green transportation real; launch green manufacturing industries; computerize a pen-and-paper health system; promote data-driven school reforms; and ramp up the research of the future. "This is a chance to do something big, man!" Biden said during a 90-minute interview with TIME.

...Biden recalls brainstorming with Obama about an all-in push for a smarter electrical grid that would reduce blackouts, promote renewables and give families more control over their energy diet: "We said, 'God, wouldn't it be wonderful? Why don't we invest $100 billion? Let's just go build it!' "

One is left with the impression that those who occupy the country's most powerful elected offices see their jobs more as running a venture capital fund than a government. Armed with literally hundreds of billions of dollars, President Obama and Vice President Biden have been empowered to almost literally remake the country in the manner they see fit. It's like SimCity but on a vaster scale (SimCountry?), except, of course, the money is real and mistakes can't be erased with a few clicks of the mouse.

Instead of simply complaining about the hubris of our leaders -- which, really is the default position of most politicians -- let's consider how a market-oriented president might consider the issues raised by Obama and Biden.

On green jobs, one could begin by asking why, if such industries so obviously represented the future, that they weren't more prolific and required government assistance. One might discover that such energy sources simply didn't make economic sense and suffered from a lack of price competitiveness against more conventional sources.

Maybe markets know something the government doesn't. Or perhaps it's a case of markets not performing correctly, with conventional energy sources the beneficiary of government subsidies or lax pollution standards that distort the price mechanism. In such case the correct government response would not be subsidies for green jobs, but an increase in taxes to reflect externalities imposed by conventional fuel sources and the elimination of government subsidies which promote their usage.

If information technology isn't being adopted by health care providers, does it not make sense to first investigate why this is the case, and what incentives cause health care providers to resist investing in such areas? It's unlikely that hospitals have resisted such efforts simply because they are stupid. Rather there is probably an incentive misalignment that should be corrected, which would both be a more effective and cheaper means of addressing the problem than simply handing over billions of taxpayer dollars.

Similarly, why hasn't a smart grid already been adopted? What do utilities know that the government doesn't? What incentives are at work?

Such an approach, however, would require our elected officials to both be humble and inquisitive in their approach, two characteristics which are not in great evidence.