I don’t know if this piece is flat out supporting wasteful spending, but it’s really close. The United States threw money down the toilet for about 35 years – until computers paid off. Ryan Avent says:
“To give just one example: during the formative years of the computing era, government was an enormous source of demand for all the intermediates to production of computing power and computing power itself. America’s military machine brought brilliant people together, demanded they do work requiring extraordinary computational power, and plied them with the funds to develop and build early computers. That work created expertise, component supply, and even private demand that fueled subsequent private investments. And government remained a significant source of final demand for the output of those later private investments. It is quite probable that computers would have been developed somewhere without all of that effort, and it’s almost impossible to know whether the money spent on these efforts might have been used better elsewhere. But I don’t think it’s absurd to look back and feel that the government’s role in supporting the development of computing (or the web, for that matter) was a Very Good Thing.”
Basically, nobody would have done computing at all unless the U.S. federal government was wasting a huge fortune on computers for at least 30 years. We would not have computers, because the basic research was far, far more expensive than any single entity could have ever afforded.
We needed to waste a money in order to get to modern computing. Check out the Univac and IBM. The company which started the world of modern computers, Fairchild Semiconductor, had large military contracts.
I had touched upon this idea a few years back when I was touting the link between second greatest event in human history and government debt. I really think with extra money sloshing around, good lucky accidents have a much better chance of happening. I do remember my dad saying computers would never amount to anything useful, and he was dead wrong. In fact, you could argue that pushing the era of computers forward 10 years was worth the expenditure.
He goes on:
“The 20th century’s wars (hot and cold) helped deliver enormous communication advances, industrial chemistry, nuclear technology, computing, and much of the technology that goes into the iPhone in your pocket and the Google driverless car soon to be ferrying you to work. Obviously, the specific innovations in those devices and the brains needed to turn technology into things people actually want are mobilised by the market. We should never forget that. But it often takes patient, determined, or plain foolish capital, and a lot of it, to turn high-concept ideas into functional prototypes and a body of knowledge capable of driving private innovation and production.”
Government spending isn’t always as directed as private spending, and that “can” be a good thing. Sitting around and dreaming about what you could do is valuable, and taking action on some of those dreams sometimes leads to wild, out of the box levels of success.
It’s pretty safe to say right now the invention and development of computers is the third greatest event in human history. 100 years from today, that’s what people will say – computers come after establishing civilization and the industrial revolution.
Wasteful government support was a huge part of making this history changing event happen.
Update 3-19: Beowulf says in the comments… “Obama said in a speech recently, “Every dollar we invested to map the human genome returned $140 to our economy”. That is a sick rate of return. You can afford an awful lot of dry holes if you can come up with a 140-bagger once in while.”.
How much did the government spend on computers from 1940-1970? Probably $200 billion in todays money. If we assume the add to the U.S economy is ~ 1.5% due to computers – which seems absurdly low, we get roughly $200bn added to the economy every year due to computers. We get that back every year from 2005 (absurdly late), going forward, for the next century or so – APPL has already built up a cash balance of $130bn plus, after paying wages and buying a ton of stuff! NPV of $200bn at a 5% discount rate a 20 bagger for the U.S. economy. For the world economy, it’s probably closer to a 50 bagger. It could easily be a much higher multiple if you step into the real of the real world and use reasonable assumptions.