Home » Quick guides » Economics In One Lesson » IV/ Public Works Means Taxes

Government spending is often presented as a panacea for all economic ills. The view that public works are a means of providing employment is of particular concern.

Consider, for example, bridge construction. This may solve a traffic and transportation problem. However a bridge to provide employment is a different kind of bridge: projects are now invented. Instead of considering where bridges must be built, government spenders think in terms of where bridges can be built.

We must look beyond the immediate toward secondary consequences. Although bridge workers may received more employment, the bridge still has to be paid for from taxes. In these terms, if the bridge costs £10 million, the tax payer will lose £10 million.

The argument being made is often a visual one. People can see the bridge being built by the workers. However, more important are the things we do not see because they have been prevented from coming into existence by taxation. 

The second string to this argument is that without the new bridge the nation would have been poorer. Because voters can see the bridge they are unable to imagine the possibilities that could have come into existence with £10 million in private hands.

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