Tag Archives: social benefit

05.25.2012 | A Better Ketchup Bottle?

In a 1964 TV commercial, during a pouring contest between 2 young boys, Heinz ketchup was “…too thick and rich to run.” In another ad, Heinz lost an OK Coral duel because it was the “slowest ketchup in the west…east, north and south.”

Now though, Heinz might have a problem.

Trying to develop a super slippery coating that would prevent deep sea oil pipes from clogging, scientists in an MIT lab created LiquiGlide. Used on the surface of a Heinz plastic container, LiquiGlide makes ketchup slide right out.

I suspect Heinz might not want its ketchup to pour more quickly.

However, even if the private cost to Heinz is considerable, citing the time millions of people would save, an economist would look at how the social benefit–the positive externality–is much greater. And that is why this story is about a lot more than ketchup.

Here you can see fast flowing Heinz Ketchup and here, a 1964 Heinz Ketchup race. And, if you are interested in reading about super slippery surfaces, this article describes the work of a Harvard lab.

Posted by: adminEcon
Tags: 19th century canals, efficiency, Erie Canal, Heinz Ketchup, innovation, MIT scientists, positive externality, private benefit, social benefit, super slippery substance
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01.09.2012 | Government’s Venture Capital

The Erie Railway went bankrupt multiple times. Primarily government funded, it originally connected 2 small NY communities and cost 4 times more than initial projections when it was completed in 1851.

Citing the financial woes of the Erie Railway, a calamitous 1913 decision to build a steel plate manufacturing plant, and the Solyndra bankruptcy, financial historian John Steele Gordon says government repeatedly is a “bad venture capitalist.”

By contrast, a recent paper from the Hamilton Project tells us that sometimes, when the private sector has no incentive to innovate, the government has to step in. Focusing on energy, they suggest that government should fund basic research, development and demonstration.

The Economic Lesson

Deciding whether a government investment is successful takes us to private and social benefit. Sometimes a business can be a financial failure but have so much of a social benefit that it might be called worthwhile. One example is the Midwestern U.S. canals that declared bankruptcy during the 19th century. As links in a broader transportation infrastructure, some believe that they should be judged on the basis of the role they played. As a result, the financial cost of these canals is offset by their intangible social benefits.

An Economic Question: Explain why you support more or less government venture capital activity.

Posted by: adminEcon
Tags: energy, Erie Railway, government subsidies, social benefit, venture capital
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