When Government Investment is Bad Investment

Under the Keynesian model of government investment, government investments are a means to lead the way and break the ice, in a stalled market, where private investors have become squirrelly about investing.  However, this Keynesian model assumes that government is applying the same criteria for investment that the market would have otherwise applied, so what happens when government applies criteria different from market demands?  Easy: investors loose money, and companies that should have flourished fail or never start. Over the last two decades, private investors have become increasingly dependent on government "investment," particularly in technology.  As technologies have become more complex and multidisciplinary, they have become more difficult to evaluate.  Investors were particularly roughed up in the IT and biotech booms, and subsequent busts, where they lacked the tools to evaluate those early-stage technologies.  In many cases, they were simply the...(Read Full Article)

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