Pilot Letter: Bait and switch

https://www.pilotonline.com/opinion/letters/vp-ed-letd-0910-20190910-o53xpcz5cjgtdazjhyqcje4ode-story.html

I like this letter because it mentions the concept of opportunity cost.

Here’s a fairly standard definition of the term:

“In microeconomic theory, the opportunity cost, or alternative cost, of making a particular choice is the value of the most valuable choice out of those that were not taken.”

In my mind the most important thing to know about opportunity cost is how it relates to government spending. You could say that every single penny of government spending is a penny not spent on something else.

There’s nothing unique about government in this, but there is a consequence. Because government doesn’t produce any goods, for the most part, the real opportunity cost of government is the loss of goods that would otherwise have been produced.

Consider the case of a war ship. All the goods that go into it become set aside from the remainder of the economy while the warship is in use. Then, ultimately, those goods are either lost in battle, sunk for a reef, or just decay into nothing.

You can expand this out to think of whole industries. The garment industry, for example, takes goods in and puts goods out, whereas the defense industry takes goods in and puts nothing out.

Obviously, the defense industry produces substantial benefits that we need and want, but you can’t eat them, wear them or get out of the rain in them.

Nearly all of government is like that. The ultimate effect it has on the world we live in is that the totality of money remains the same, but the totality of goods goes down.

That’s opportunity cost.

27 thoughts on “Pilot Letter: Bait and switch

    1. If both are functions of government spending, then the observation you make is far from obvious.

      Why is spending on cybersecurity better than spending on the wall?

      Like

      1. Because one can provide a much more cost effective (and much needed) long term protection and the other will provide very marginal and over-priced protection.

        Like I stated, “obvious”

        Liked by 3 people

      2. RE: “Because one can provide a much more cost effective (and much needed) long term protection and the other will provide very marginal and over-priced protection.”

        I think you have that backwards.

        Cybersecurity has the shortest half-life of any good known to man. In contrast, the wall (an analog device) will be long-lived and never lose one iota of its material value as a passive restraint on migration.

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        1. Cyber security is an ongoing project. Incremental steps may have a short life, but as long as we are dependent upon a connected “web”, the defense will continue.

          Liked by 3 people

        2. “Cybersecurity has the shortest half-life of any good known to man”

          Your ignorance on this issue is palpable; educate yourself and post something that makes a modicum of sense.

          Advice: start with gaining an understanding of what “cyber-security” is….

          Liked by 1 person

        3. RE: “Your ignorance on this issue is palpable; educate yourself and post something that makes a modicum of sense.”

          I don’t suffer from any ignorance on this subject, but if claiming I do is all you have to say, then you’re wasting everybody’s time here.

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          1. “I don’t suffer from any ignorance on this subject,”

            Your comment makes it clear you chose not to do even a little research; seriously, see what the nature of the subject area is all about and how the disparity between the two types of “protection” vary in terms of a benefit to the Country.

            Here’s a thought; cyber threats are global, the ridiculously expensive wall is NOT. Broaden your perspective, a bit…

            Liked by 1 person

          2. RE: “Your comment makes it clear you chose not to do even a little research.”

            So you claim to know, but in fact I have written and edited quite a few cybersecurity plans in my time. I have a handle on the nature of the subject.

            That cybersecurity is short-lived is hardly a remarkable observation. It’s half-life is a consequence of many different evolutions all happening at once. The evolution of technology is a big one.

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          3. RE: “I’d love to read one, can you provide a link or document.”

            No. They aren’t public and don’t belong to me.

            But here’s an invitation: Instead of calling me ignorant, why not share superior knowledge, if you have it?

            The question at issue is: In what sense is cybersecurity long-lasting, as compared with the physical security of a wall?

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          4. It takes me the better part of a semester to “educate” people to the rudiments of the subject matter and your request to have it happen on a blog forum is not really doable.

            However, if you start researching the topic and run into aspects of it that confuse or are beyond your understanding, post something and I’ll respond.

            Liked by 1 person

          5. RE: “However, if you start researching the topic and run into aspects of it that confuse or are beyond your understanding, post something and I’ll respond.”

            I just did: In what sense is cybersecurity long-lasting, as compared with the physical security of a wall?

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          6. “In what sense is cybersecurity long-lasting, as compared with the physical security of a wall?”

            Excellent question; because cyber security has no end it will continue to evolve and react to new cyber threats as they also evolve and become more sophisticated.

            On the other hand, a wall is, well, a wall. It does not evolve (particularly at 1,500 hundred miles long) and it will eventually lose its integrity and crumble.

            Liked by 1 person

          7. So the argument is, cybersecurity is a better way to spend taxpayer money because it is long-lasting. It is long-lasting because it is high maintenance. It is high maintenence because requirements are constantly changing. And because requirements are constantly changing, cybersecurity is a better investment than physical security.

            I can see that, but not favorably. I’m still left wondering, Why is one opportunity cost better than the other?

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          8. “Why is one opportunity cost better than the other?”

            Ultimately it’s a matter of ROI; the cost of protection versus the degree of threat.

            The wall, as a protective barrier, would “protect” (based on perception of threat) to a certain degree. I believe the cost of the wall relative to that “protection” would be a terrible investment relative to the “opportunity” to protect our internet-based infrastructure/financial/military systems.

            A cyber attack on our power grid for a single example would reap more havoc (read “cost”) than anything the southern border imagination problem would impose.

            Consequently, the money would be much better spent there.

            Liked by 1 person

          9. RE: “A cyber attack on our power grid for a single example would reap more havoc (read ‘cost’) than anything the southern border imagination problem would impose.”

            Not necessarily. A a single shipment of fentanyl smuggled across the border could be just as bad, as could many smaller shipments smuggled over time. I’d rate the severity of the cyber and physical security risks as about equal.

            The probability of occurrence, however, is not equal, if only because the cyber threat is highly dynamic in comparison with the physical security threat. I’d rate the probability of risk occurrence as higher for cybersecurity

            So yes, you get different returns on your mitigation investment, but for the same reason you don’t necessarily get the same level of risk reduction. To go from red to green in cybersecurity doesn’t necessarily cost the same or less than going from red to green in physical security. At least not inherently.

            Which is the original question: Why is it better to spend taxpayer money on one and not the other? I don’t think there’s a simple answer.

            Like

  1. “…whereas the defense industry takes goods in and puts nothing out.”

    DOD ensures a safe and secure environment for businesses to thrive. Without that, businesses would have to spend resources on private security organizations. Organizations powerful enough to protect shipping interests worldwide. That is a loss to R&D, sales, marketing, capital investments etc. that is the company’s main purpose.

    Next, every part of a ship, for example, is made by a civilian company. Mines supply copper, iron, aluminum, oil for paints, and so on. In addition, because the military helps with R&D, for example, monies could be spent elsewhere. And economies of scale may allow more competitive exports to other nations.

    All those civilians buy homes, eat food, drive cars, raise kids and consume services with their paychecks. DOD spends $600+ Billion a year and that translates into multiples for our GDP.

    Our present system does not generate enough tax revenue to cover government spending. So in effect, Americans are borrowing from an entity that prints money to add a Trillion a year to the economy. Again with a multiplier effect.

    Liked by 1 person

    1. From the post: “Obviously, the defense industry produces substantial benefits that we need and want, but you can’t eat them, wear them or get out of the rain in them.”

      It’s also true, as you point out, that there are secondary transactions related to the defense industry. The civilian workers who build warships, for example, spend their wages in the private economy.

      But notice: While all the money that goes into the defense industry also comes out, all the goods that go in do not.

      It’s when you do a before-and-after that you find that the defense industry has a different effect than the garment industry. One changes the balance between the totality of goods and the totality of money; one does not.

      Like

      1. The real question about our bloated defense industry is not whether it supports the economy or whether it is a place where “goods” disappear. The real question is . . . Is spending on such stuff the best way to use the money it consumes. For example, the $1.5 Trillion being poured down a rat hole for the F35 would better serve the country if we spent that money on a $1.5 Trillion windmill farm connected to the grid. At least we would get SOMETHING for our money instead of NOTHING.

        Liked by 1 person

        1. Dual use. DARPA — Internet. There are many military projects that result in commercial use.

          Considering that the government is the biggest chunk of R&D dollars…

          Liked by 1 person

  2. I lost you. If Americans buy a carrier for defense, and it lasts for 50 years, is that not as durable part of the economy as a house or certainly a car. Instead of a couple chipping in by pooling their income to buy a family SUV, all Americans are “chipping in” to buy a security system for their “house”.

    Liked by 1 person

    1. RE: If Americans buy a carrier for defense, and it lasts for 50 years, is that not as durable part of the economy as a house or certainly a car?”

      It would be, if it were part of the economy we all participate in, but it isn’t.

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      1. Still baffled.

        Our participation as taxpayers is 100%. We all paid for and benefit from that carrier. Just like roads, sewer lines, parks, trash trucks, police cars, etc.

        I’m not an economist. I didn’t even play on on TV. So I must be overlooking something either obvious or esoteric.

        Wouldn’t be the first time.

        Liked by 1 person

      2. RE: “I must be overlooking something either obvious or esoteric.”

        Perhaps a different example will help.

        Suppose a hurricane wipes out the food supply, blows away all the clothes and flattens all the houses. After the storm, economic activity resumes as people replace the food, clothing and shelter.

        Does the resumption of economic activity mean there was no loss?

        Like

  3. So, roughly 150 people for 7 years, or more like the cancellation of contracts costing 300-500 jobs.

    Never miss ’em, EXCEPT that additional wall means fewer Trump Tower/Hotel/Golf employees..

    Liked by 1 person

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