Wednesday, August 10, 2011

Conservatives Can't Do Math!

Ted Nugent struggles with math...
Considering their vicious assault on Wisconsin's teachers, I'm not surprised.  But check out how badly they bungle their "analysis" (in the very loosest sense of the term) of the positive impacts of the stimulus.
The CEA released its most recent assessment of the impact of the ARRA. Some popular accounts, from the Heritage Foundation, from the Weekly Standard, and from Ted Nugent, argue that those estimates of output and employment effects are outlandish. They also cite incredibly high cost-per-job figures. Here are some thoughts on the those arguments (analyses would be going too far).

What is truly hysterically funny (and demonstrates the innumeracy so typical of so much writing these days) is the following assertion:
... The council reports that, using "mainstream estimates of economic multipliers for the effects of fiscal stimulus" (which it describes as a "natural way to estimate the effects of" the legislation), the "stimulus" has added or saved just under 2.4 million jobs — whether private or public -- at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.
This seemed like a familiar argument, and then I realized Casey Mulligan performed a similarly (incorrect) calculation two years ago, which involved a similar stock-flow mismatch calculation. My rebuttal was here; to quote:

Note that $787 is spent over several years (a flow). 3.5 million jobs is a stock. But wouldn't we want to incorporate how long those jobs would be around? That suggests we should use job-years instead of jobs, to make the numerator and denominator comparable. The Administration estimated the number at 6.8 million [2]. That works out to a cost per job-year of $116 thousand.

Since innumeracy abounds, here is a reprise, applied to the Weekly Standard calculation. So far, $666.3 billion has been spent over the past two years (a flow). The cited 2.4 million number applies to an instant, 2011Q1 -- a stock. In previous quarters, the number of jobs created was higher (and lower). What one wants to do is to compare a flow to a flow. The number of person-years (equal to one job over one year) is 3.911 million (a flow). Doing the math correctly leads to an estimate of $170,366.

To further highlight the stupidity of the Weekly Standard calculation, suppose in 2015, when almost all funds are expended, only one job was still being supported. Then, using their preferred methodology would indicate each job cost $787 billion...
Stupidity abounds on the right.

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