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Brooks Wilson's Economics Blog: Murtha's Airport and the Stimulus Debate

Monday, April 27, 2009

Murtha's Airport and the Stimulus Debate

Over the course of his congressional career, John Murtha has funneled nearly $200 into the Johnstown-Cambria Co-Murtha Airport.  The airport has three flights per day.  The FAA has approved an $800,000 "shovel ready" project to repave a crosswind runway that's used as a backup to the main landing runway (Jim Acosta and Janet Rodriguez.  "Remote Murtha airport lands big bucks from Washington," CNNPolitics .com, April 23, 2009 or the video link). 

The project illustrates differences between economists supporting and opposing the stimulus.  Economists supporting the stimulus argue that even bad projects create jobs now and replace a vicious cycle of market psychology in which bad news feeds retrenchment which engenders more bad news with a virtuous cycle.  Economists who support the stimulus might support the project if it employs mostly idled resources.  Economists opposing the stimulus argue that the government's inherent inefficiency in selecting good investment projects, the deadweight loss from taxation, and the high percentage of employed resources imply that few new resources will be employed and any recovery will be weak because of the size and scope of wasted resources.  Good investment projects would employ idled resources and have good long run return on investment.  This project would not pass their scrutiny.

I believe that most economists see a need for airport expansion (Paul Joskow, Deregulation, AEI Event, February 10, 2009, Minutes 29:50-32:45.  The link provides a link to the audio of the lecture).  The lack of airport expansion, particularly the building of new hubs, is a factor limiting the success of Carter era price deregulation.  I would guess that most economists would not like the rate of return on the Murtha airport project.  As of March 2009, Pennsylvania's unemployment rate was 7.8%. 

Brad DeLong who supports the stimulus and Kevin Murphy who opposes it are typical of the debate.  DeLong failrly summarizes Kevin Murphy's arguments against it and his support for it ("Best Anti-Stimulus Argument: from Kevin Murphy, Brad DeLong's Semi-Daily Journal.)
I think he [Murphy] overstates the deadweight loss effect and is working with the wrong conception of “efficiency” for these purposes when he claims that government is inefficient, so the odds of a stimulus being successful therefore aren’t as bad as he indicates. And this doesn’t change the fact that I haven’t heard any better ideas than doing a big stimulus. But this is a sobering reminder that a big stimulus doesn’t guarantee success—very hard work needs to be done on making sure that stimulus funds target genuinely idle resources rather than diverting non-idle resources while leaving the idle ones as idle as ever.

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