Dr. Lang’s introduction provides a fairly accurate depiction of the recent history of Nevada’s economy. Although he failed to identify the impact that easy-money policies at the Federal Reserve had on infusing artificial credit and illusory home equity earnings into the holdings of private families, Lang notes that it was this illusion of disposable income that drove record profitability among Nevada’s resorts. As profitability rose, so did the demand for labor – drawing workers into the state en masse.
Now that the market has begun to correct for the government’s mistakes, many workers that had relocated to Nevada – especially in the construction industy – find that they have been displaced as a result of these policies.
However, Lang continues by stating that, with the demise of profitability in the gaming industry, that Las Vegas is well-suited to become a leader in renewable energy development. Lang cites as a potential model the USTAR initiative that was launched in neighboring Utah. This initiative allocates state money for renewable energy research to the state’s university system.
Lang says that the government does not pick winners and losers in the renewable energy field in Utah. Instead, university researchers develop new technologies and pitch them to venture capital firms in Utah’s “Angel Network.” The venture capital fims then decide which technologies make the most sense to invest in.
The point that Lang misses is that Utah state government is picking winners and losers by making some technologies more or less profitable depending on the level of tax subsidies offered by Utah lawmakers. Lawmakers in Utah offer a bevy of tax subsidies to renewable energy companies that would otherwise not be profitable. These are in addition to the generous federal tax subsidies such as the Production Tax Credit.
Dr. Lang may have very good intentions in suggesting new avenues for economic growth within Nevada. However, prosperity is not generated from an industry that can only be profitable through subsidies – leeching off the productivity of all other taxpaying citizens.
Dr. Lang concludes by claiming that, if the state is to see economic recovery, lawmakers will have to spend much more to subsidize both K-12 and higher education. To his credit, Lang says that “money isn’t everything” with regard to K-12 education and that meaningful structural reforms are important.
However, Lang should note that in-state tuition rates at Nevada’s public universities are far below those of neighboring states and (according to data from the US Department of Education) nearly half of the national average. So, by reasonable standards, higher education in Nevada is already heavily subsidized and, indeed, this may be the root of many problems. Among other adverse results is that the abnormally low in-state tuition rates help to crowd out private universities from competing in the state. Further, this lack of competition likely hampers the quality of education offered at the state schools.
I applaud Lang for trying to offer solutions. However, his central arguments are ill-conceived because they fail to consider all of the dynamics involved.