We hear a lot about the government ‘creating jobs,’ and the like with government ‘stimulus funds’ and ‘bailout funds,’ etc. The kneejerk reaction of those untrained in economics is “Oh this is good, we’re in a recession so we need more jobs. If the government creates jobs, then there will be more money for people to spend and the economy will start rolling again.”

The kneejerk alternative reaction is “Oh great, the government is going to create jobs. This is bad because the government is going to increase its debt etc etc” OK you know the arguments. You’ve heard them a thousand times. But what about truly legit jobs? What about things we do need? I mean, there is government money going for things like blueberry research in Georgia which are almost certainly pork if not otherwise unneeded, but what about, for instance, scientific research at a large institute?

Well first let’s talk theory and then I’ll bring up an example of what happens when government money is introduced to a project. The trouble with government money is that it’s guaranteed as long as you spend all of what you got this year. This is because anything you don’t spend shows that the grant was too big, and therefore can be cut, but if you spend every red cent, the government sees that you must be under-funded, and more money will be granted.

This distorts the profit incentive and encourages stagnation and bad money handling. Let’s look at two imaginary research and development projects.

Project 1 is being developed with private funds. If they don’t get it developed quickly and get it working and on the market, investment capital will dry up and the investors will move on to more profitable ventures. The entrepeneurs will likely be ruined and won’t garner much support for more investment should they have another idea. In the face of ruin, the entrepeneurs work hard to get their product out as fast as possible.

Project 2 is being developed with public funds. The law, being that much research is needed for the development of this product, states that funding will be given for the project until it is finished at which point the government will simply give the product to the developers. Even though they have the possibility to make more money should they finish their project, the entrepeneurs are encouraged to work slowly and even feign progress because as long as they are “still researching,” there will be a paycheck. And as long as they use all of their money each year, the paycheck will grow because the government will assume that they are underfunded.

Example: cold fusion technology. How close we are to getting cold fusion is debatable, as is whether or not it’s even possible in the first place. Regardless, researchers have been announcing that we are just a few years from getting it to work for several decades, and buckets of public money has been thrown in to help them get there. Many professors have built their retirements off of pretending to do research and publishing papers that prove that we need fusion technology and that government money is the only way to go.

Example: Amtrak. This is probably the best example. Amtrak is an abysmal failure. Riding Amtrak takes longer and costs more than driving in many situations, and sometimes costs as much as flying. Amtrak is subsidized, which stems growth because the industry no longer has any profit incentive to progress. The reason this example is so good is that in contrast, the American freight rail industry is booming. Getting some ridiculous efficiency like 400 miles per ton of freight per gallon, compared directly with Amtrak’s own 38 mpg per passenger. Let’s put that in perspective.

A minivan weighs about a ton. With eight passengers, your fully-loaded minivan weighs about 1.5 tons, assuming each person in the van weighs a little over 100 lbs. Your minivan probably gets around 25 mpg highway fully loaded if you have a standard minivan like a Toyota Sienna, which I believe gets around 28 under best circumstances.

So if you’re alone in your minivan, you’re looking at 25 mpg per person.

Get a passenger? 50 mpg per person, because you’re splitting the gas. Got 7 passengers? 25*8 = 200 mpg/passenger. You’re also moving about 1.5 tons, so we can compare that to the freight efficiency by saying that’s 25 mpg / 1.5 tons1/.075 = 16 2/3 miles per gallon per ton.

So what does this mean? A fully loaded minivan is 5.26 times as efficient at moving passengers than Amtrak, (and remember this is just fuel and not including time), even carrying one passenger, added onto the driver, and driving that big gas-guzzling van, is still more efficient than taking the train.

But even fully loaded, your minivan is a whopping 24 times less efficient at moving passengers (by weight) than a commercial freight train. I think it’s a relatively safe conjecture to say that if Amtrak wasn’t subsidized, their numbers would be a lot closer to this. Just to sum up:

Amtrak (subsidized) can move a single passenger (around 150 lbs) at 38 mpg. That’s 38 miles per gallon per .075 tons, or 2.85 miles per gallon per ton.

Commercial freight trains are over 140 times as efficient as Amtrak. This is what government money does. This is why government money is bad. Actually, this is only one of a myriad of reasons. But this is one reason.