Hoisted from Comments: Robert Waldmann on the Durability of Capital
Robert Waldmann:
A Free Lunch for America: You are assuming that infrastructure depreciates away in 30 years. This isn't true. Also, I think [infrastructure] is a one horse shay -- no depreciation for 30 years then poof. I'd say that, with normal maintainance whose cost is included in the correct calculation of returns, infrastructure lasts a long long time. The Brooklyn bridge is still there (oh and I regularly drive on the Appian way).
Also, as always, another free lunch would be to sell bonds and invest the proceeds in the S&P 500. Or is that a free supper?
"Regularly drive on the Appian Way" wins the infrastructure debate.
Two comments:
First, at a meeting I was at a couple of weeks ago, Robert Solow lamented that he knew his age when he said "one-horse-shay depreciation" and was rewarded with blank looks from an entire room of economists. He would be happy to hear you say it.
Second, selling government bonds and investing the proceeds in equity index funds is not a free lunch, exactly. It is the largest hedge-fund operation ever contemplated--and in my view a good thing to do…
