> A common argument in favor of government actions is that they are necessary to make us take account of long run consequences.
I think a steelmanned presentation of this would make the rebuttal more meaningful.
The version of the "common argument" that I think is most common among those who advocate governmental paternalism is that individuals can't be trusted to make long term decisions in their own best interest - not that they aren't incentivized to.
E.g. people can't be trusted to save their money for the future, so government should take it from them by force and give it back to them in the future.
Accordingly, I don't see how the rebuttal effectively rebuts it. The rebuttal seems to ultimately be that individuals have greater incentives towards their own welfare - including long-term welfare - than the government, which may have particularly limited incentives regarding the long-term.
But fundamentally, that is true with all governmental intervention. The individual always has more at stake, and hence more incentive, to optimize his future than the government.
The fact that the degree of difference in incentive may be greater in this case, does not change the fundamental calculus.
The interventionists would still assume the paternalist perspective that although the individual has greater incentive to pursue his self-interests, he can't be trusted to make the decisions in his own best interest.
Indeed, just as one could point to instances where governments make bad decisions regarding the future, one can point to endless instances of individuals lacking the reason or will to act in their own best interests.
To be clear, I disagree with the paternalistic position, I just don't see this is as much of a rebuttal, if it was meant to be one.
No public corporation will invest long term, at least in the US. That would be failing in their legal fiduciary duty to "increase shareholder value" over the short term.
An individual owner or private corporation *might*.
A political system could be organized to encourage long term thinking. Step one would be to have stake holders not subject to repeated short term election cycles. This is seen more often in old fashioned parliamentary systems and constitutional monarchies, featuring a hereditary peerage and/or monarchy, or at least life appointments to either role.
Obviously the US doesn't have such a system; the only long term political power is in the parts of the judiciary that don't stand for (re)election. It also doesn't have the appropriate ideology - the popular consciousness wants shorter terms and less reelection of incumbents.
For Americans, the solution being implemented, such that it is, is to allow the rich to purchase politicians, behind the fig leaf of democracy. If the owning class/primary campaign contributors want long term government projects, there will be long term projects even without long term politicians. (And many of the owning class would much prefer to spend tax money on those projects, rather than their own - the ROI for campaign contributions and lobbyists appears to commonly be better than that on other investments, at least assuming the folks making those contributions are rational.)
What legal obligation to increase (maximize?) shareholder value in the SHORT term? This is clearly false. If it were true, companies would not be able to invest in R&D.
IANAL, but I recall references to a case brought by shareholders demanding that the corporation shorten its time horizon. The corporation lost, creating a precedent. It could still invest for the future, but only a relatively near future. Maybe as much as a few years, but certainly not a lifetime.
I'm not sure whether I can find that reference again, but it's a popular citation - and surprisingly long ago. When I read it, I figured that e.g. AT&T's Bell Labs (from my youth) would have been vulnerable to a similar law suit. They did a fair amount of basic research, which didn't have a clear expectation of how it would pay off. AFAIK, they never got sued by their shareholders - but they still changed their ways.
FWIW, I've seen this mentioned more than once, to the point where I mistakenly classed it as "well known" and non-controversial. On reflection, and given that you don't recognize it, not even as "that damn thing again", it's probably only relatively well known in one political subgroup, most likely the one that can be recognized by terminology like "late stage capitalism".
I might be able to find it again by checking what I've read from that subgroup in the last couple of years. I recall a somewhat specific citation (who was suing whom, in what year) in at least one book - that might be enough for someone who knows their way around legal records to find it. Or if I'm really lucky, there was actually a complete citation. (I don't tend to read political book that lack notes and bibliographies.)
A long term investment increases current shareholder value if investors can predict that it will be profitable. The prediction is being made not by rationally ignorant voters but by investors who will make money if they succeed in recognizing profitable long term investments before other investors.
That seems to be the explicit goal of almost all tech startups. Many have run on deficits year after year, often never being profitable at all before getting valuations in the billions.
> A common argument in favor of government actions is that they are necessary to make us take account of long run consequences.
I think a steelmanned presentation of this would make the rebuttal more meaningful.
The version of the "common argument" that I think is most common among those who advocate governmental paternalism is that individuals can't be trusted to make long term decisions in their own best interest - not that they aren't incentivized to.
E.g. people can't be trusted to save their money for the future, so government should take it from them by force and give it back to them in the future.
Accordingly, I don't see how the rebuttal effectively rebuts it. The rebuttal seems to ultimately be that individuals have greater incentives towards their own welfare - including long-term welfare - than the government, which may have particularly limited incentives regarding the long-term.
But fundamentally, that is true with all governmental intervention. The individual always has more at stake, and hence more incentive, to optimize his future than the government.
The fact that the degree of difference in incentive may be greater in this case, does not change the fundamental calculus.
The interventionists would still assume the paternalist perspective that although the individual has greater incentive to pursue his self-interests, he can't be trusted to make the decisions in his own best interest.
Indeed, just as one could point to instances where governments make bad decisions regarding the future, one can point to endless instances of individuals lacking the reason or will to act in their own best interests.
To be clear, I disagree with the paternalistic position, I just don't see this is as much of a rebuttal, if it was meant to be one.
The assumption that individuals (politicians included) are rational is not always correct, but it's a good first approximation.
And this assumption leads to specific predictions that, by and large, are confirmed by observations, e.g those listed in this post.
No public corporation will invest long term, at least in the US. That would be failing in their legal fiduciary duty to "increase shareholder value" over the short term.
An individual owner or private corporation *might*.
A political system could be organized to encourage long term thinking. Step one would be to have stake holders not subject to repeated short term election cycles. This is seen more often in old fashioned parliamentary systems and constitutional monarchies, featuring a hereditary peerage and/or monarchy, or at least life appointments to either role.
Obviously the US doesn't have such a system; the only long term political power is in the parts of the judiciary that don't stand for (re)election. It also doesn't have the appropriate ideology - the popular consciousness wants shorter terms and less reelection of incumbents.
For Americans, the solution being implemented, such that it is, is to allow the rich to purchase politicians, behind the fig leaf of democracy. If the owning class/primary campaign contributors want long term government projects, there will be long term projects even without long term politicians. (And many of the owning class would much prefer to spend tax money on those projects, rather than their own - the ROI for campaign contributions and lobbyists appears to commonly be better than that on other investments, at least assuming the folks making those contributions are rational.)
What legal obligation to increase (maximize?) shareholder value in the SHORT term? This is clearly false. If it were true, companies would not be able to invest in R&D.
IANAL, but I recall references to a case brought by shareholders demanding that the corporation shorten its time horizon. The corporation lost, creating a precedent. It could still invest for the future, but only a relatively near future. Maybe as much as a few years, but certainly not a lifetime.
I'm not sure whether I can find that reference again, but it's a popular citation - and surprisingly long ago. When I read it, I figured that e.g. AT&T's Bell Labs (from my youth) would have been vulnerable to a similar law suit. They did a fair amount of basic research, which didn't have a clear expectation of how it would pay off. AFAIK, they never got sued by their shareholders - but they still changed their ways.
My guess is that you are misinterpreting the case, but I can't check that unless you can find it.
Fair enough.
FWIW, I've seen this mentioned more than once, to the point where I mistakenly classed it as "well known" and non-controversial. On reflection, and given that you don't recognize it, not even as "that damn thing again", it's probably only relatively well known in one political subgroup, most likely the one that can be recognized by terminology like "late stage capitalism".
I might be able to find it again by checking what I've read from that subgroup in the last couple of years. I recall a somewhat specific citation (who was suing whom, in what year) in at least one book - that might be enough for someone who knows their way around legal records to find it. Or if I'm really lucky, there was actually a complete citation. (I don't tend to read political book that lack notes and bibliographies.)
A long term investment increases current shareholder value if investors can predict that it will be profitable. The prediction is being made not by rationally ignorant voters but by investors who will make money if they succeed in recognizing profitable long term investments before other investors.
That seems to be the explicit goal of almost all tech startups. Many have run on deficits year after year, often never being profitable at all before getting valuations in the billions.