should we finance all good ideas?

February 16th, 2015 Comments Off

It seems that Slovenian society doesn’t have an agreement as to what projects should be publicly funded, so there is always pressure for more and more public financing of ‘useful’ projects, while the deficit is growing.

let’s look at the utopian approach first, let’s count how much money should the government disseminate to satisfy everything that the society produces. let’s break it down:

  • we have 2M population.
  • let’s assume that even retired and some underaged people can still participate in projects,
  • let’s assume that importing foreigners is also an option which will compensate for the ones that couldnt participate.
  • let’s also assume, that 10% of the population is capable of coming up with ideas and leading them, and that
  • average size of an ideal project is 10 members.

This means that we will have 200k active projects, which will need capital to pay for 10 member’s living expenses, and the projects’ material and program expenses. let’s say this cost structure is something like:

  • decent salary – $50k per person annually (average across the population)
  • decent baseline annual project budget is $1M (keep in mind, that this now has to include everything that public sector is already covering – from schools and hospitals to EU projects contributions and everything in between)

this means, that if the country wanted to pay for everything, the budget would have to be:

  • 2M people * $50k = $100 billion
  • 200k projects * $1M = $200 billion
  • so total budget would be $300 billion, and average project’s budget would be $1.5M

Slovenian budget is $10 billion, and the total GDP of the country is $50 billion. So this obviously won’t work.

Every time some new project expects public funding, it implicitly expects that if everyone did the same, the society would require $300 billion to function. Every time a new project is publicly demanding public funding, they are broadcasting this expectation into the general public. Every time a new project succeeds with this pressure, it sends the message that the society can afford $300 billion worth of public funding.

I believe it is crucial we form a broad agreement about what to do with this gap between ‘implied expectations’ and reality. We’ll look into that next time.

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