A friend sent me an interesting article Don’t Lowball the Upside of Fixing Roads and Bridges about infrastructure investment policies. The article was mostly about transportation infrastructure but I think it would ring as true if you replace transportation with broadband.
It looks at broadband as public good…
Things like transportation networks aren’t like other forms of capital. They’re not like factories, or machine tools or office buildings, because they have elements of what economists consider a public good. This is something that the private sector, left to its own devices, can’t or won’t provide enough of. And indeed, if you look around the world, although there are certainly private toll roads, the government is a big player in road- and bridge-building almost everywhere. There’s almost certainly a reason for that.
The article gives three reasons government should invest in infrastructure, which are worth considering, especially as Minnesota policymakers look at broadband investment in the form of the Border to Border grant program and work done by the Office of Broadband Development and offers perspectives and the return on investment…
So for all these reasons, infrastructure is often — though not completely — a job for government. It represents a way that government spending complements private business activity rather than crowding it out.
This principle is fairly easy to see in economic models. In 1993, economists Marianne Baxter and Robert King showed that if government can make a kind of capital that the private sector doesn’t, then government investment gives a big boost to the economy, because it increases private investment as well. That benefit will look like a fiscal stimulus, but it’s not Keynesian in nature — it comes from public goods.
In a recent article, I discussed how to analyze the costs and benefits of infrastructure spending. One potential cost comes from the fact that building or fixing roads and bridges requires using resources that private companies could otherwise use. That’s called “crowding out.” But one big benefit of infrastructure spending is that after it’s finished, private investment can be “crowded in,” due to the complementarity between government capital and private capital. The World Bank has found clear evidence that crowding in occurs in developing countries.
And a developing country is what the U.S. might become if it lets its infrastructure deteriorate more.