Jardine, it's interesting to see you're now using SPHERICAL arguments (assuming that I'm just assuming what's in issue). In reality of course your assumption was false - all I did was use a double semirhetorical question to get you to think about what you'd just said. Of course I haven't advanced the discussion beyond that point yet; I was waiting for you to catch up!

In future it would be more productive if, instead of accusing me of circularity, you asked why I've assumed x? But before you do, please check to make sure I actually have assumed x.

As for your main point, it's good to see you're thinking clearly at last!

I recognise the need for comparison against alternative options including the option of doing nothing. Indeed there are road schemes in four states that I'm currently opposed to, and for three of those (including the one the new Victorian premier has pledged to cancel) I'd support a cheaper version. I used to be of the view that the best solution was a cost:benefit ratio analysis, but since then I've seen how they often get perverse results based on dodgy assumptions (such as the one that used a ridiculously high (8%) discount rate to justify the use of FTTN on the NBN).

I now think the most appropriate measure would be the ratio of internal rate of return to regionally appropriate interest rate. By regionally appropriate I mean the interest rate should be adjusted to take account of resource scarcity/abundance (which usually means labour scarcity/abundance as most other things can be moved fairly cheaply). For instance it may be appropriate to use a rate of 3.5% in Sydney (where the economy is going comparatively well) but only 0.5% in Adelaide (where the unemployment rate is higher).

So much for Abbott trying to turn Victoria's election into a referendum on a tunnel in melbourne.
Victoria covers the whole state, it does not stop on the outskirts of Melbourne.
Turnbull is the man they need, the door is wide open.

Aidan
"By regionally appropriate I mean the interest rate should be adjusted to take account of resource scarcity/abundance (which usually means labour scarcity/abundance as most other things can be moved fairly cheaply). For instance it may be appropriate to use a rate of 3.5% in Sydney (where the economy is going comparatively well) but only 0.5% in Adelaide (where the unemployment rate is higher)."

What if someone else doesn't agree with your opinions about what the price of credit should be? Or your definition of "region"? How to stop this being merely a contest of arbitrary opinions with no objective basis?

Got that rational criterion there yet? How do you know that the governmental use of resources isn't going to withdraw them from uses that, in society's evaluation, satisfies more urgent and important wants and allocate them to satisfying less urgent or important wants, as decided by society?

Since the question is WHETHER government knows its use of resources is just right, too little, or too much, and if so how; and since your answer assumes THAT it does or can, therefore thank you for proving that it's not a spherical argument on my part, it's a circular one on yours.

Tristan
It's not me painting you as an absolutist statist, it's you.

We have just established that you do not recognise any principle by which the power of government could or should be limited because at ever stage, your argument would be available that government can finance things cheaper, and its actions are not infected with the profit motive. You may *think* that you support some small little sphere of individual liberty and property, not liable to be overridden by mere and irrational governmental power.

But unless you can establish what rational principle delimits the legitimate sphere of governmental action, the fact that you believe you are not an absolutist statist, doesn't prove that you're not. It proves you're contradicting yourself.

Aidan and Tristan
I said "rational criterion", not "circular yabble-yarp".

Jardine,

"What if someone else doesn't agree with your opinions about what the price of credit should be?"
The best solution would be for the RBA to model its inflationary impact to determine the price of credit.

"Or your definition of 'region'? How to stop this being merely a contest of arbitrary opinions with no objective basis?"
The Federal and State governments should make a collective decision on a definition. I suggest it be based on commuting time, but I'm happy to go with whatever they agree on. Practically anything would be an improvement on the status quo, which is itself better than nothing.

"Got that rational criterion there yet? How do you know that the governmental use of resources isn't going to withdraw them from uses that, in society's evaluation, satisfies more urgent and important wants and allocate them to satisfying less urgent or important wants, as decided by society?"
Firstly, what you regard as "society's evaluation" is really no such thing, as it's capitalism's evaluation: skewed to the desires of the rich.
Secondly, many resources aren't scarce, so the impact of withdrawing them from those other uses is often trivial.

Thirdly, I think you misunderstand the process, as your question contains a false assumption.
Unless the resources are currently idle, governmental use of resources WILL withdraw them from uses that, in capitalism's evaluation, satisfy more urgent and important wants and allocate them to satisfying less urgent or important wants IN THE SHORT TERM. But in the long term the effect will be the opposite: it will free up more resources to allocate to satisfying other wants.

The relative importance of short and long term wants is something that should be evaluated, and governments generally do evaluate it. There are various methods available to do so. including calculation of net present value, benefit:cost ratio, and internal rate of return. As I said, I now regard the best method to be the ratio of internal rate of return to regionally appropriate interest rate, as (unlike the others) it takes into account the local scarcity or abundance of resources.

(TBC)

(continued)

"Since the question is WHETHER government knows its use of resources is just right, too little, or too much, and if so how; and since your answer assumes THAT it does or can, therefore thank you for proving that it's not a spherical argument on my part, it's a circular one on yours"
Nice try, but this only goes to prove my point about your spherical arguments. Firstly you're redefining the question in an attempt to make my argument look circular. But your ACTUAL question was...
"How do we know whether government is providing too much, too little, or just the right amount? Ultimately, how do we rationally account for the human satisfactions foregone?"
...and secondly, EXPLAINING HOW something does or can is not just ASSUMING that it can!

So your arguments are all balls.

JKJ thinks the mixed economy is 'absolute statism'. I guess that makes Menzies an 'absolute statist' - because the public sector under Menzies was more robust than after Hawke and Keating were finished with it.