Last Thursday, President Barack Obama delivered an address to a joint session of Congress in order to provide an approach by which the Federal government can help alleviate the unemployment rate that has stagnated just below 10 percent for over a year. There is much not to like about it. Among many errors, the most fundamental in President Obama’s approach to the problems facing the economy in his speech was when he quoted JFK saying, “Our problems are man-made – therefore they can be solved by man. Any man can be as big as he wants.” He falls straight into what the economist and social theorist F.A. Hayek termed the “Fatal Conceit” – the belief that the human mind can understand the workings of society just as it can the workings of an engine or similar physical process.
By looking at society within the isolated environment of Washington D.C., free from many of the incentives that help guide human action, the President and his economic advisers have fooled themselves into thinking that they can centrally plan their public works project and expect it to actually advance the public welfare. Indeed, his programs for both improving public schools and national infrastructure are greatly compromised by a failure to recognize what would help what is already there and what would be an effective use of the resources at hand.
For one thing, how do we know if things like high-speed Internet and shiny science labs will actually increase the efficiency of American education? As someone who went to high school somewhere with above average science labs, I can certainly attest to the fact that they are scarcely used. All of the shiny glass and chrome knobs were for the most part just window dressings, there to ensure that anyone gazing upon the classroom would know that the students there were taught science. What we actually used were simple Bunsen burners, rubber tubes and glass lab-ware, nothing that could not be bought by local government through a science catalog or even Amazon.
Even though a high tech science lab may have made sense on paper, it did not translate into better education in practice simply because the equipment that most high school experiments need are simple. In addition, it is doubtful that schools even need high-speed Internet under the current model of teaching since it is very rarely when students actually need to go on the Internet. Surely, this would change if American education took a structural change toward the model offered by something like the Khan Academy, but until this happens high-speed Internet is simply not something that is necessary in the American classroom..
Another case where the President has chosen the appearance of being high tech over the reality of an optimal allocation of resources is his continued support for high-speed rail. Invoking the fact that China already has begun a sizable investment in a HSR network that will connect its country, the President argues that the United States is falling behind, saying, “Building a world-class transportation system is part of what made us an economic superpower. And now we’re going to sit back and watch China build newer airports and faster railroads?”
This argument, though, shows just how deeply he is stuck within the fatal conceit because he equivocates technical efficiency with allocation efficiency, two completely different criteria. Though it may be a case that HSR and new airports are more technically efficient than what is found in the United States, which does not mean that those two would be a worthwhile investment. One must be able to know whether the benefits of that increased technical efficiency will outweigh the massive costs of that investment, and yet President Obama completely fails to address this point. Instead, he makes a “keeping-up-with-the-Joneses” style argument by saying that because China – a country that has a completely different system of infrastructure than America – is investing in state-of-the-art infrastructure, the United States should too. This is simply absurd.
When we actually look at the record of HSR whether in America or in China, though, it is clear that the investment is not as beneficial as everyone seems to think. For one thing, despite the completion of a HSR network from Beijing to Tianjin, there is a thriving industry for transporting the many who cannot afford the high prices for a ticket, which cost $9, on such a train between those two cities by bus, a ticket for which cost $5.40. The Chinese government was even forced to deploy 70,000 extra buses – the infrastructure of the past if you believe Mr. Obama – to ferry people between the two cities during their new year last February. After incurring a building cost of $46 million per mile, the line is now losing around $100 million per year according to the Washington Post. This is a testament to technological ego at the cost of economic inefficiency
Yet another example of HSR lunacy is the project to build HSR in California, which has proven to have vastly underestimated costs when it was put before voters. At first it was supposed to be $33 billion, but its costs were soon raised by about 25 percent to 43 billion – not too bad, and expected since infrastructure projects are always underestimated. It is easier to ask for more funds once the project is already underway than to be brutally truthful about their massive costs when there is still the possibility of the voters rejecting the project. Alas, this is not the end of the fiscal shenanigans since The Mercury News has estimated that California’s investment will cost between $63 and $87 billion by the time it is finished at a time when California’s government is already drowning in debt.
Much of this project passes through the lowly populated center of the state that is already sufficiently serviced by its current infrastructure so the fact of the matter is that it is not an efficient use of the resources that are being dedicated to it. Indeed, the conditions for HSR to be an efficient form of infrastructure require not only an extremely dense population, but also one that is a relatively wealthy so as to be able to afford the maintenance of the rail-line without external subsidies. The Kyoto-Tokyo route in Japan fits these conditions so HSR is a good investment, but it is simply not a good use of resources if the line is going through lightly populated areas that do not have the wealth to support them. Nevertheless, President Obama simply does not take this economic consideration into account, but looks at the problem from an engineering point of view simply picking the best option without keeping in mind what would be the best use of the resources that are going into building HSR. Across the United States, and even in China, these resources have better uses that would be able to do far more toward the end of ensuring economic prosperity.
In the end, most of President Obama’s push for public works is a bunch of useless investments that will do little to advance the public welfare. His push to “modernize” schools by improving their science labs and Internet facilities would do little to actually improve education and whatever improvements would be made could easily have been done by local governments. In addition, the President’s, as well as many other people’s, continued obsession with high-speed rail is simply not corresponding to the realities of the American economy. The United States, contrary to what was suggested in the speech, already has a network of infrastructure that meets its needs and any improvements to that network ought to be conservative in the respect that it improves what is already there. HSR, on the other hand, would be an expensive, vanity project that would simply be an inefficient utilization of the resources at hand.
All of this is evidence that President Obama is under the delusion of Hayek’s fatal conceit. He equivocates an engineering solution with an economic solution that must keep in mind the manifold of different uses that resources could be devoted to and the comparative costs and benefits of each use. This top-down approach will simply result in more money wasted and more resources diverted from productive uses, the last thing any president who wants to increase employment should want. Ergo, the public investments within the American Jobs Act should be rejected lest the American economy be saddled with ever more government-projects that prove to be nothing but wishful thinking.
Throughout his speech, the President constantly emphasized that he believed the simple solutions above would be able to create jobs and help to pull the American economy out of recession. However, this confidence in the ability to know what must be done to save the economy, to paraphrase Paul Krugman, is nothing less than a conceit. President Obama and whatever economists continue to advise him have claimed that they have the knowledge in order to make the claim that all we need to do is fix American infrastructure and schools in order to create jobs.

Harrison Searles is a Collegian columnist. He can be reached at [email protected].