Stimulate This: Build the Grid First

As everyone in range of youtube now knows, President Elect Obama* is committed to spending what it takes to revive the American economy.  A very welcome development, after months of spending what it takes to transfer risk from the rich to the rest of us.  But still, such ambition does beg a question:  stimulate what?

My basic approach to this question is the obvious one:  pouring money into an economy works to stimulate activity, but it works best if you spend the money on things that have the capacity to evoke more economic activity in their turn.

That is — while there is a new new deal urgency to provide relief to those suffering the worst in this economic downturn (i.e., the jobless and the foreclosed), there is a ceiling to the broader economic impact that such relief can provide.  Take a look at this excellent post by Eric over at The Edge of the American West in which a fisking of John Maynard Keynes’ letter to Roosevelt in 1938 underscores what was understood  then (and still holds true) about the limits of relief as anti-recession policy.  (See also this for an analysis that extends into the role of WW II spending on recovery.)

So if you really want to promote long term economic growth from within a depression/recession, you have to buy some tickets in the game.**  Or, to put it more formally, you have to use the power of government spending to build capital that will in turn prove to be economically useful over a much longer time-frame than the immediate quarter or even year in which the Treasury prints the necessary cash (debt) to round out all those zeroes being talked about in Washington right now.

From where I sit (staring out over the MIT campus), that means spending on projects rich in science and technology — or at least ones that foster the uses of what science and technology produce: ideas and physical things that contribute to human well-being.

So what I’d like to do here is to begin a discussion, if possible, of what we should do with the stimulus process that could be informed by what science and engineering approaches suggest are the best long term investments in the country’s economy.

A couple of suggestions to get us going, then:

For one, there is just a broad based investment in the American research establishment.  It makes little sense to try and pick winners in the next great idea competition; the trick is to fund as many of the best people as you can find and let them come up with ideas that enhance human well-being (and thus produce a lot of economic activity in their wake).

That’s the thinking behind this post (and this follow-up) in which I made a pitch for a major investment in human capital:  paying for the education and early research careers of a much larger pool of young scientists and engineers than we now support.

It’s a good idea in just about any economic climate, and would have some stimulus effect — but in all honesty it falls between the relief and stimulus poles of any future plan.  The need to support young scientists is becoming acute as universities both public and private confront the joys of endowments and state/federal budgets that are under the pressures we all know.  Also, though we will see economic and cultural benefits from the discoveries to be thus enabled, the time frame is a little loose.

For a more concrete idea, try this:  early action on one thing the Obama team has already said it wants:  a new “smart” power grid.

The new grid is a prime example of the sort of stimulus I think we need because, first, it will pay for itself over a reasonable amortization period, given the potential improvement over current losses in the power distribution system.

But more than that, the new grid is crucial because it enables much else that we want to do for economic, environmental, and national security reasons.  We need a dramatically enhanced power transmission system to handle the particular demands on the transport of electricity from the proposed increase in renewable generating capacity in the wind/solar belts of the largely underpopulated middle and southwestern desert portions of the country.

Those places are a long way away from most of the major population centers that will use the power thus generated, which means we need as efficient a grid as possible.  But the issue is more pressing than that.  An industry study [link to PDF] suggests that wind/solar power being less controllable and more irregular than conventional plants, puts unusual demands on a grid.  The one we have now won’t hack it, and it will prove to be a significant design and construction plan to get one in place that can.  See this NYTimes piece for a first cut through the reasons why.

All of which means that funding now for a new grid meets two goals:  immediate classical Keynsian stimulus, with jobs created right here right now, and long term capital investment of the sort that only government can undertake. Think of this as 21st century analogue to the construction of the interstate highway system, without many of the ecological side effects.  A win-win in other words.

(FWIW, as a more direct heir to the road building of both the thirties and the fifties,  I’d love to see an investment in high speed passenger rail that would eliminate the need for air travel on any journey of less than 300 or so miles around the major hubs — the same basic arguments apply, but because the benefits are felt most immediately in regions rather than nationwide, a harder sell).

So over to you, dear readers:  what else should our better part of trillion bucks of new government capital spending buy?

*I still love writing tht.

**The reference is to this old joke.

***Faraday is here both for his contributions (enormous) to the creation of the electric economy and for his yet to be topped line on the reason to support scientific research.  Asked by Prime Minister William Gladstone of what use was electricity, he replied, “Why, sir, there is every possibility that you will soon be able to tax it!”

Image:  Alexander Blaikle, “Michael Faraday*** delivering a Christmas Lecture at the Royal Institution,” c. 1856.

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4 Comments on “Stimulate This: Build the Grid First”

  1. Michelle S Says:

    To heck with a “dramatically enhanced” grid–at this point I would settle for an adequate grid. The current US power grid is hopeless, and is due for a major, catastrophic failure pretty much any day now. Generation’s not much of a problem, but transmission, as you say, is a mess. “Woefully inadequate” comes to mind as a relevant phrase. Of course, one small thing that would help is if the NIMBY whiners would shut up when power companies try to install lines near their precious houses. I wonder how quickly those people would change their minds if they had to put up with something like the Northeast Blackout.

    For the record: I am a bit biased about this, because a) my uncle was president of a utility company, so I learned a lot about the nightmares those companies have to go through when trying to expand their systems, and b) I grew up with power lines in my backyard, and I turned out just fine. Or maybe I didn’t. Maybe that’s why I’m so odd. Hmm, maybe I’m not the best one to make this argument…

  2. Spiv Says:

    Most grids are also not set up to handle a house that generates more power than it consumes. There are fortunately a few areas in Florida set up for individuals “selling power back,” but it’s sparse. Really makes individual power generation (which I still believe is the ultimate answer to our problems) much less attractive.

    Why individual? Or even per-neighborhood? Because the loss of energy due to resistance over the lines is actually very significant. You shorten the lines, the power you generate does more.

    I also think de-centralizing our automotive industry would do us some good. Imagine a country where dozens of smaller businesses made cars of all types instead of the big-3 basically trying to not hand it over to japan completely. Much more innovation, much more design prowess, and much, much less bureaucracy loss in the making of.

  3. Kaleberg Says:

    Other possible ideas include:

    – more fiber optic cable and high speed internet access
    – developing and building power storage facilities (Time shifting is a big problem.)
    – building solar and wind power systems (This will push the technology and drive the price down.)
    – a career GP medical education and clinic program to generate salaried MDs and RNs without debt
    – deprivatizing our military’s support functions (More privates, less privatizing.)
    – rebuild the student loan program with direct government loans and more grants and programs for loan forgiveness in exchange for service (see the MD thing above)
    – support the local food movement and local agriculture as part of the school lunch program

    The trick is that not everything has to work. Ever since the 13th amendment, only the government can capitalize trained and healthy people. Even if the government muffs things here and there, it can make out big time from the side effects.

  4. Hey, in his inaugural address, Barack Obama just mentioned the grid. How’s that for influence!

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