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How many of you, when you hear announcements of how many jobs have been saved by the stimulus plan, immediately do the mental arithmetic to figure out how many

by mos1 17y ago

How many of you, when you hear announcements of how many jobs have been saved by the stimulus plan, immediately do the mental arithmetic to figure out how many dollars of taxpayer funds were spent to save each job? I do not, because that is a fool's calculation. The value created is not one year's salary, it's the difference in the present value of an individual without a job and the present value of an individual with a job, including all estimable secondary effects (both positive and negative.) If you simply divide it and compare it to a year's salary, you'll sit there and go 'HURRR THAT IS DUMB', but in reality, you're proving only that you don't really understand policy analysis. ---- I'm reminded of a situation that occurred many years ago in my career, when I was still working in a corporate setting. My team hit a seemingly intractable combinatorial explosion problem while trying to create a tool for the sales force. It was incredibly difficult, and quickly blew through the allocated budget (which we'd told them right from the gate, was inadequate). The management just assumed we were lying... that we weren't up to this task, or we were just lobbying for more money and man-power for our group (I was trying to make a very specific high-end hire to help, and I had already purchased some serious iron). In fact, they were so convinced that this couldn't be this difficult to accurately analyze that they started shopping consultancies, and most agreed with us, that this would be difficult and expensive... but one did not. One said "yes, we can build it, no problem." A year later, the consultancy had burned through a pile of money, and had nothing to show for it. Only then did management recognize that maybe this seemingly simple configuration problem was not, in fact, as simple as they imagined. And perhaps we weren't just lying or waving our hands when we said "this shit is not as simple as you think it is." (and even then, they didn't admit it outright. I had an all-day meeting which consisted solely of them asking me stupid question after stupid question, as to why various simple approaches wouldn't work... and me having to draw out specific examples on a whiteboard, indicating the business and technical problems with these simple approaches.) It's sad, but common, for people to assume that other people's jobs are easier than they really are. Even very smart people fall into that trap... but generally speaking if intelligent, hard-working people are advocating something that seems stupid to you, it's probably because you don't understand the problem or the solution.

anamax 17y ago
> The value created is not one year's salary, it's the difference in the present value of an individual without a job and the present value of an individual with a job, including all estimable secondary effects (both positive and negative.) If you simply divide it and compare it to a year's salary, you'll sit there and go 'HURRR THAT IS DUMB', but in reality, you're proving only that you don't really understand policy analysis. You're assuming that the job will last beyond the year and that we couldn't simply send that person $X dollars and produce most of the same benefits.
- jacobolus 17y ago
  If you think it's controversial among fiscal conservatives to do job promoting stimulus programs, just wait until you suggest just sending poor people full-time salaries worth of extra cash for nothing. Good luck with that.
- jbooth 17y ago
  Your comment, particularly the part where you talk about "simply send that person $X and produce most of the same benefits" underscores your complete and utter lack of comprehension of his post. Try reading it again.
  - mos1 17y ago
    Thank you for saying this for me. I knew he was off the rails as soon as he indicated that my claims were based on an assumption of duration of employment. That statement only makes sense if you use the same model that the parent used, in which the only value captured is the worker's salary.
  - pg 17y ago
    It would be better if you explained in a neutral way what you thought was the source of the misunderstanding.
    - jbooth 17y ago
      Ok, although IANASS (not a social scientist) (edited to add: and sorry anamax for the uncivil tone, long day): Economic activity has benefits for society at large -- we get stuff out of it, and there's a feedback loop where more people with money in their pocket means more demand, which means more people employed, which means money in their pocket, etc. Recessions are when the economy gets out of balance (historically inventory oversupply, more recently it tends to be financial meltdowns) and that feedback loop goes negative -- less money in pocket, so less spending, so less production. Counter-cyclical spending is, according to economic theory, the one point in the cycle where the government should be encouraged to spend money like they're in vegas, up 50k and hanging at the strip club. Breaking this negative feedback loop is priority #1 -- debt can be paid back later, and if you've been breaking out your counter-cyclical toolkit, you've already lowered interest rates to near-zero so this is really cheap debt, 1% interest or lower -- if you produce any return at all, you've got a win in addition to the counter-cyclical effects. Once you've decided to spend, you've got to decide how. Giving money to people in lump sums (which was in fact about 40% of the bill, the bill was 40% tax cuts) is fast and simple, so it certainly has a place, but keeping people in a job is far more effective because you create externalities. That job is producing something of value to the economy, that person is gaining skills/experience leading to future employability, and assuming that business is ok, their labor might lead to additional job openings at the same company later. These are all sustainable improvements that build on themselves and contribute back towards that positive feedback loop. Just spewing money out to people without any targeting whatsoever can only be a brake on recession -- it doesn't really help lay the foundations for the bounceback.

by mos1 17y ago

anamax 17y ago

> The value created is not one year's salary, it's the difference in the present value of an individual without a job and the present value of an individual with a job, including all estimable secondary effects (both positive and negative.) If you simply divide it and compare it to a year's salary, you'll sit there and go 'HURRR THAT IS DUMB', but in reality, you're proving only that you don't really understand policy analysis. You're assuming that the job will last beyond the year and that we couldn't simply send that person $X dollars and produce most of the same benefits.

jacobolus 17y ago
If you think it's controversial among fiscal conservatives to do job promoting stimulus programs, just wait until you suggest just sending poor people full-time salaries worth of extra cash for nothing. Good luck with that.
jbooth 17y ago
Your comment, particularly the part where you talk about "simply send that person $X and produce most of the same benefits" underscores your complete and utter lack of comprehension of his post. Try reading it again.
- mos1 17y ago
  Thank you for saying this for me. I knew he was off the rails as soon as he indicated that my claims were based on an assumption of duration of employment. That statement only makes sense if you use the same model that the parent used, in which the only value captured is the worker's salary.
- pg 17y ago
  It would be better if you explained in a neutral way what you thought was the source of the misunderstanding.
  - jbooth 17y ago
    Ok, although IANASS (not a social scientist) (edited to add: and sorry anamax for the uncivil tone, long day): Economic activity has benefits for society at large -- we get stuff out of it, and there's a feedback loop where more people with money in their pocket means more demand, which means more people employed, which means money in their pocket, etc. Recessions are when the economy gets out of balance (historically inventory oversupply, more recently it tends to be financial meltdowns) and that feedback loop goes negative -- less money in pocket, so less spending, so less production. Counter-cyclical spending is, according to economic theory, the one point in the cycle where the government should be encouraged to spend money like they're in vegas, up 50k and hanging at the strip club. Breaking this negative feedback loop is priority #1 -- debt can be paid back later, and if you've been breaking out your counter-cyclical toolkit, you've already lowered interest rates to near-zero so this is really cheap debt, 1% interest or lower -- if you produce any return at all, you've got a win in addition to the counter-cyclical effects. Once you've decided to spend, you've got to decide how. Giving money to people in lump sums (which was in fact about 40% of the bill, the bill was 40% tax cuts) is fast and simple, so it certainly has a place, but keeping people in a job is far more effective because you create externalities. That job is producing something of value to the economy, that person is gaining skills/experience leading to future employability, and assuming that business is ok, their labor might lead to additional job openings at the same company later. These are all sustainable improvements that build on themselves and contribute back towards that positive feedback loop. Just spewing money out to people without any targeting whatsoever can only be a brake on recession -- it doesn't really help lay the foundations for the bounceback.