dear prudence
Neat excerpt from Richard Maybury‘s Whatever Happened to Penny Candy?, a book I first read in high school and a great primer on economic theory, no matter your age or aptitude:
Industries generally develop in three stages: First scientific feasibility, second engineering feasibility and third economic feasibility.
Using the airline industry as an example, the question in the 1800s was: “Is long-distance air travel possible?” In the 1800s, balloons were already in use, but they were not practical. The problem to solve was the heavier-than-air machine. In 1903, the Wright Brothers proved scientific feasibility. They risked their time, money and lives to show that a heavier-than-air machine could fly. In 1927, Charles Lindbergh proved engineering feasibility. He risked time, money and his life to show that long-distance air travel was possible. This gave investors enough confidence to risk their money in the aircraft industry. In 1935, the Douglas Aircraft Company came out with the DC-3, which was the beginning of economic feasibility.
The modern airline industry resulted from all this risk-taking. Today, a middle-class American can go any where in the world much faster and in much greater comfort than a Roman emperor could. Travelers fly because the benefits are greater than the costs. This is economic feasibility.
This three-step model explains why governments are terrible at economic development. The “experts” who comprise the government gamble with other people’s money, so they tend to confuse scientific and engineering feasibility with economic feasibility. Once science and engineering prove something can be done, those who comprise the government will do it–even if the costs are greater than the benefits.
I think a lot of this is happening with the so-called “green industry” and all the talk of artificial creation of “green jobs.” I’m all for good stewardship of the environment, but the bottom line is that if “sustainability” isn’t economically feasible on a broad scale, it’s not going to happen, and the conjuring up of jobs by the government can’t change the fundamentals of economics. People have to think the benefit greater than the cost. Period.