Renowned Keynesian polymath, Woody Brock, in a presentation given at the ADC Forum in 2012, advocated for government investment in profitable private sector infrastructure projects in order to generate income with which to combat rising deficits. Basing his arguments on Arrow and Kurz’s Public Investment, the Rate of Return, and Optimal Fiscal Policy (1970), he argued the following:
We need a new investment bank with investors from around the world, with analysts paid two to three million a year to keep them non-corrupt, who do nothing but evaluate different [infrastructure projects].… These objective people using the Arrow-Kurz calculus will compute that [the rate of return on project A] is -4[ percent]. It will be posted worldwide. [Project B] has a rate of return of 16%. [It] will get the money, [Project A] doesn’t. It’s crystal clear. In addition to generating profits for the government and balancing the budget, he claimed, this would also have additional benefits, such as job creation.
Let us examine these points, one by one. First, profitable projects (i.e., those yielding a positive return) will find voluntary funding on the free market as investors search for the most profitable venues in which to deploy their saved resources. Consequently, government investment in these projects will not create new jobs beyond those that would have been created anyway.
It is just a joke, isn’t it? The state has no possible way of ever making a profit because that is not what they do, they follow the rules and only follow the rules. They do not do efficiency and they do not do profit, so logically, how could you put them in charge of determining profitable enterprises for the state to engage in? Ridiculous on the face of it and I don’t care how much math you put into it, it still won’t fly.