Andrew Colclough

Web Design & Dev., Liberty, Economics, Football
 

This seems vaguely familiar: AP - Unemployment unchanged by projects

WASHINGTON – A federal spending surge of more than $20 billion for roads and bridges in President Barack Obama's first stimulus has had no effect on local unemployment rates, raising questions about his argument for billions more to address an "urgent need to accelerate job growth."

An Associated Press analysis of stimulus spending found that it didn't matter if a lot of money was spent on highways or none at all: Local unemployment rates rose and fell regardless. And the stimulus spending only barely helped the beleaguered construction industry, the analysis showed.

With the nation's unemployment rate at 10 percent and expected to rise, Obama wants a second stimulus bill from Congress including billions of additional dollars for roads and bridges — projects the president says are "at the heart of our effort to accelerate job growth."

Transportation Secretary Ray LaHood defended the administration's recovery program Monday, writing on his blog that "DOT-administered stimulus spending is the only thing propping up the transportation construction industry."

Road spending would total nearly $28 billion of the Jobs for Main Street Act, a $75 billion second stimulus to help lower the unemployment rate and improve the dismal job market for construction workers. The Senate is expected to consider the House-approved bill this month.

But AP's analysis, which was reviewed by independent economists at five universities, showed the strategy of pumping transportation money into counties hasn't affected local unemployment rates so far.

"There seems to me to be very little evidence that it's making a difference," said Todd Steen, an economics professor at Hope College in Michigan who reviewed the AP analysis.

And there's concern about relying on transportation spending a second time.

"My bottom line is, I'd be skeptical about putting too much more money into a second stimulus until we've seen broader effects from the first stimulus," said Aaron Jackson, a Bentley University economist who also reviewed AP's analysis.

via READ THE FULL AP ARTICLE

It's familiar because I wrote the exact same thing.... except that was last November....and without an official study. And I'm not really boasting. I don't have some special power of logic or ability to predict the future. All I did was apply a couple, rather simple logical mathematic and economic principals. The credit should really go to the wisdom gained from reading a couple dusty old papers on economics...

The problem here is that logic is not necessary to generate social policy, or political capital. Being seen to be 'doing something' to fix the economy, does not require logic and rationality, evidence from results, or much of anything at all. Simply doing something, and being seen: That's politics. Thomas Sowell refers to this phenomenon as The Vision of the Anointed (the title of one of his excellent books, which I am reading). What mattered with the Stimulus was the Vision => not the results. 

I guess I should have bet some money on it. Actually, I guess we all did. Almost $1 Trillion, in fact... 

As far as The Vision of the Anointed is concerned, here are some quotes, for those interested in the concept:

"One of the most important questions about any proposed course of actions is whether we know how to do it. Policy A may be better than policy B, but that does not matter if we simply do not know how to do Policy A. Perhaps it would be better to rehabilitate criminals, rather than punish them, if we knew how to do it. Rewarding merit might be better than rewarding resultsif we knew how to do it. But one of the crucial differences between those with the tragic vision and those with the vision of the anointed is in what they respectively assume that we know how to do. Those with the vision of the anointed are seldom deterred by any question as to whether anyone has the knowledge required to do what they are attempting." -- P. 109

"In the tragic vision, individual sufferings and social evils are inherent in the innate deficiencies of all human beings, whether these deficiencies are in knowledge, wisdom, morality, or courage. Moreover, the available resources are always inadequate to fulfill all the desires of all the people. Thus there are no "solutions" in the tragic vision, but only trade-offs that still leave many unfulfilled and much unhappiness in the world." -- P. 113

"The presumed irrationality of the public is a pattern running through many, if not most or all, of the great crusades of the anointed in the twentieth century--regardless of the subject matter of the crusade or the field in which it arises. Whether the issue has been 'overpopulation,' Keynesian economics, criminal justice, or natural resource exhaustion, a key assumption has been that the public is so irrational that the superior wisdom of the anointed must be imposed, in order to avert disaster. The anointed do not simply to have a disdain for the public. Such disdain is an integral part of their vision, for the central feature of that vision is preemption of the decisions of others." -- P. 123-124

"In their zeal for particular kinds of decisions to be made, those with the vision of the anointed seldom consider the nature of the process by which decisions are made. Often what they propose amounts to third-party decision making by people who pay no cost for being wrong--surely one of the least promising ways of reaching decisions satisfactory to those who must live with the consequences." -- P. 129

"The vision of the anointed is one in which ills as poverty, irresponsible sex, and crime derive primarily from 'society,' rather than from individual choices and behavior. To believe in personal responsibility would be to destroy the whole special role of the anointed, whose vision casts them in the role of rescuers of people treated unfairly by 'society'." -- P. 203

"A California farmer can always show the television audience the abundant crop he has been able to grow because of federal water projects. But no one can videotape the crops that would have been grown elsewhere, at less cost to the economy, if there were no federal subsidies to encourage the use of water delivered at great cost into the California desert instead of water delivered free from the clouds elsewhere." -- P. 257

"In the anointed we find a whole class of supposedly 'thinking people' who do remarkably little thinking about substance and a great deal of verbal expression. In order that this relatively small group of people can believe themselves wiser and nobler than the common herd, we have adopted policies which impose heavy costs on millions of other human beings, not only in taxes, but also in lost jobs, social disintegration, and a loss of personal safety. Seldom have so few cost so much to so many." -- P. 260

"There are no solutions; there are only trade-offs." -- P. 142

"To those with the vision of the anointed, the question is: What will remove particular negative features in the existing situation to create a solution? Those with the tragic vision ask: What must be sacrificed to achieve this particular improvement?" -- P. 135

In case you were wondering - I hold to the tragic vision. How about yourself?

 

Filed under  //   American Recovery and Reinvestment Act   and that which is unseen   creating jobs   economics   stimulus   that which is seen   thomas sowell   tragic vision   vision of the annointed  
Posted January 11, 2010
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When you see these signs - do you get the joke? (Hint: Seen vs. Unseen)

Photo

Part of me laughs, and part of me cringes whenever I see these signs....because they are absolute rubbish. This sign is based on the assumption that we the public are either too lazy, or just too ignorant to think beyond what we immediatly see.

Whenever we are presented with this concept: that the government can "put people to work," the question must be asked, "How?" 

When a non-state entity creates a job, it does so either by taking out a loan on the investment bet that the job created will produce enough value to repay or exceed the loan taken, or by reinvesting its own existing capital with a similar goal.

The State "creates jobs" or "puts people back to work" either with existing tax revenues, or by taking on debt to be funded through future tax revenues. I used quotes above because anyone with a grasp of elementary mathematics would realize that this is neither "creating jobs" nor "putting people back to work." It is nothing more than shifting work around.

Ask yourself, what would the tax revenues taken by the state to 'put Oregon back to work' have been used for otherwise? What of the things the tax-payers would have invested their money in, had it not been taxed away?

The answer is: jobs.

Perhaps the tax-payer was planning on buying some new shoes (a shoe salesman's paycheck), going out for an extra nice dinner (a restaurant worker's wages and tip), a kitchen remodel project (construction material producers, contractors, cabinet makers, plumbers, etc) planning to add to their payroll at work to hire a new employee, or even donating money to their favorite charity. But these things will never be seen because some politician had the nice, though deceptive and false idea that they had the ability to "put Oregonians back to work."

It is important at this point to understand that money is nothing more than a representation of labor, or work. We choose to work and earn money because money allows us to trade the value of something we are good at (in my case, web developement), for something we value that we aren't good at, or couldn't possibly create on our own (e.g. a ticket to football game. I neither play football, nor do I have the knowlege or ability to coach a team, let alone build a football stadium. Heck, I even suck at Madden...).

The point is that the sign above is clearly hogwash. It is based on the flawed notion that governments create things. To accept this idea, is to throw out the economic concept of opportunity cost. Government is force. The government is the only entity that we allow the power to involuntarily take our money and re-appropriate it. In this case - it is the opportunity for the tax dollars to have been spent elsewhere - that the government is forgoing so they can be assigned to this road project. If the sign was actually honest it would read: Taking a portion of your work, and directing it to someone or something else. Or perhaps simply, Making Oregonians pay for this road project.  

But telling the truth doesn't matter to politicians because when there is a problem (such as a down economy) they must be seen as doing something to fix the problem. The perception that they are doing something to 'put Oregon back to work' is far more important politically than the actual truth, that they just moved work to a project that the voters will see. What the voters won't see is all of the jobs that were sacrificed to make that particular road project possible.

It is important for me to mention that here, I am not necessarily arguing against road or other government projects. I am however calling out the hack politicians who think that tax-payers are dumb enough to fall for the ludicrous idea that government can create jobs by simply spending them into existence. From here, you can draw your own conclusion on whether the 'stimulus' bill will actually stimulate anything, other than some politician's delusion of grandure.

Oh, and here's the real irony of ironies: This sign is on a road leading up to the city Amtrak station. Amtrak is in business today, and its employees have jobs, only because they are subsidized with money taken from tax-payers. I suppose a sign for that could have read: Putting Amtrak back to work - which of course actually means, Forcing you to pay for Amtrak, rather than whatever else you valued more. 

 

"In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause - it is seen. The others unfold in succession - they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference - the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, - at the risk of a small present evil."

-That Which is Seen, and That Which is Not Seen -Frédéric Bastiat, 1850

 

Filed under  //   American Recovery and Reinvestment Act   absurd   economics   jobs   oregon   politics   putting Oregon back to work   seen vs unseen   stimulus   taxes  
Posted November 12, 2009
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