Stimulus Package

"The way I see it, the first job of my administration is to put people back to work and get our economy moving again." -- Barack Obama, 1/16/09

Voters and consequently politicians have among other biases, a make-work bias. This make-work bias misses the point of a job and how the economy works.
"The Dallas Fed economist W. Michael Cox and the journalist Richard Alm illustrate this process in their 1999 book Myths of Rich and Poor, citing history’s most striking example, the drastic decline in agricultural employment: “In 1800, it took nearly 95 of every 100 Americans to feed the country. In 1900, it took 40. Today, it takes just 3.…The workers no longer needed on farms have been put to use providing new homes, furniture, clothing, computers, pharmaceuticals, appliances, medical assistance, movies, financial advice, video games, gourmet meals, and an almost dizzying array of other goods and services.”

Since I am not an anarchist, I believe there should be some government jobs and government spending. If we are looking at the government to help create or save job, we need to look ask

1. Is this an public good that will not be produced by the market? A public park or a lighthouse is the stereotypical example. There is not a practical way to restrict access to the benefits and bill for the use of a public good.
2. If government is to provide the good or service, will it be at least as efficient as contracting it out to private enterprises?
3. Does the benefit outweigh the costs? You need to count jobs as a cost not as a benefit. Labor should be counted as a cost like a machine, raw material, or land.
4. Apart from economics, is this a constitutionally allowable activity for the Federal government?

As a practical matter with this most recent stimulus package, I have a trouble believing that this money will be well-spent. I do not believe that politicians will evaluate projects properly. There is far too much emphasis on job creation. They really need to focus on the net present value complete with opportunity costs for all the inputs. With so much money being thrown at projects, how selective will they be? I suspect we will get projects of dubious economic benefit. Ethanol, synfuels, bridges to nowhere