Government investment 2

If the U.S. government wants to do "investments", they should clarify the nature of investments first.

There are a couple of types of investments, generally debt and equity. With an investment in debt, the investor is giving money for a certain return, the debt backed by something like real estate, or company assets or intellectual property. If the debtor doesn't pay his debts, the bondholder takes what was pledged. In equity the investor invests in the company and its future; that investment is backed by the company's property but the debt holders have first claim and, in a failure, there is usually little left. Next, the investor invests his own money, or someone the investor assigns or pays invests the money for him.

There are several components to this type of transaction that are obvious. First, an investment is voluntary; it is always done with the approval of the person whose money is being invested. Second, investment involves risk; the investor may lose his money. Indeed, the risk determines what kind of investment the investor is willing to make. Risk is an inherent part of investment; it is what the investor is paid for. But the risk is not simply the loss of money; the other side of the risk coin is pain. In an investment, the investor investigates the investment, takes money from another aspect of his life and deprives himself of its use--perhaps forever, and risks his money, his comfort and a bit of himself in his decision. (An interesting aspect of the 2008 meltdown was the appearance of "investments" that appeared "riskless', a sure sign of something wrong.)

Now, how can the government do this?--aside from the practical questions of whether they can do it well--whether their motives are good and their assessment even adequate. They can give money to people or things; that's easy. But investments demand a relationship with the investor and the entity he invests in; that relationship hinges on the possibility of risk and pain. So the government takes Other Peoples' Money and gives it to someone else and calls it an investment. But an investment requires one's own money. And regardless of how the bureaucrat may want the target of the money to succeed, it will never be his "investment".

So the government might give money to a wind farm. A transfer of money takes place; but that doesn't make it an "investment" any more than Charlie Sheen's professional girlfriends are receiving investment money from him. The wind farm is getting a "subsidy", a gift for a purpose--albeit a possible good purpose--but it is not an investment. And what if you own a competing wind farm? Is the appropriation of your money to subsidize your competitor in any way right?

Any politician who calls this an investment is either foolish or insincere.