Monday, June 22, 2009
The Italian Economy: Day 12
Factories, of course, make no sense as government investments, because they are capital intensive. If you are a government and really want to stimulate employment, you should invest in labor-intensive industries such as agriculture and tourism, which are the two industries that currently dominate the Southern Italian economy.
George Mason moment of the day: we were complaining about the inefficiency of bureaucracy and without knowing it, my professor described Parkinson's Law. "Work expands to fill the time provided." What an excellent little book - look it up, it takes about a half hour to read the whole thing. Funny throughout.
My last thought: The opportunity cost of doing business in Southern Italy is simply too high. With labor costs standard throughout the country (as discussed in earlier posts), bureaucracy costs as high there as anywhere else, terrible infrastructure, competition from the underground economy, and guaranteed interaction with the mafia if you turn a profit, there's simply no reason to go further from the heart of the EU and do business in the South of Italy. The problems are so vast, I can't even begin to suggest a solution.
Compared with the totality of knowledge which is continually utilized in the evolution of a dynamic civilization, the difference between the knowledge that the wisest and that which the most ignorant individual can deliberately employ is comparatively insignificant. ~Fredrich Hayek in The Constitution of Liberty