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Source link: http://archive.mises.org/11091/delongs-stimulus-accounting-a-deconstruction/

DeLong’s Stimulus Accounting: A Deconstruction

November 25, 2009 by

Brad DeLong runs a quick calculation and decides that each stimulus job actually showers $77,000 in net benefits on the economy. Yet, we have seen that literally every step in his reasoning is suspect. FULL ARTICLE by Robert P. Murphy


Tobby November 25, 2009 at 8:14 am

I would actually rather my tax dollars be burned, than flow into the projects and thus boost the “services” I get.
Love this sentence!

htran November 25, 2009 at 8:22 am

Why did deLong even bother writing that piece of crap if he can just make up $110,000? Unbelievable.

I love how you showed that the stimulus calculation is still net positive in non-recession times. Wonderful way of revealing deLong’s contradictions.

Thomas November 25, 2009 at 9:00 am

Nice post. Loved the “hamster treadmills” line.

DeLongs calculation is just so beyond insane that it almost borders to plain awesomeness.
That a professor of Economics can get away with this **** blows my mind.

Mr Eko November 25, 2009 at 9:16 am

What’s truly sad about DeLong’s (and Krugman’s) blog is not what they write themselves, they are entitled to their own twisted views, but rather all the enthusiastic commenters who accept whatever they say as canon.

Mike November 25, 2009 at 9:19 am

He was educated at Harvard and taught there and at MIT and now at Berkeley. Do not question him. He’s totally smarter than you.

David Hayes November 25, 2009 at 11:10 am

I don’t understand how this guy even did this calculation. He is mixing apples and oranges. This direct federal cost is going into the economy and the extra revenue is coming out. So even by twisted Keynesian logic, these two signs should be reversed…

Direct federal cost −$92,000
Extra federal and state revenue +$27,000

Walt D. November 25, 2009 at 11:41 am

Let say we accept the dubious 1 million jobs created for $787 billion. We have 15 million people out of work – closer to 25 million if you use U6. It would take 15 years and close to $12 trillion to create jobs for these people. OK, this analysis is suspect, but is it any less ridiculous that the so called official analysis?

mikey November 25, 2009 at 11:49 am

People require “stimulation” to go after the things they want out of life. ( I personally favor a cattle prod.)

Production can be always taken for granted. The challenge is getting people to consume.

More money =a higher standard of living, its so obvious.Don’t we realize that money is capital?

Never question this holy trinity of mainstream economics! Repent ye heretics.

Mr Eko November 25, 2009 at 11:53 am

David Hayes,

You’ve stumbled upon the Rosetta Stone of understanding Keynesian economics.

Apples + Oranges = Fruit

Sean A November 25, 2009 at 12:02 pm

Here is another good article by DeLong:
He resorts to an archaic, ruinous, and thoroughly debunked [historical] “economic” mechanism to justify more stimulus spending–the Phillips Curve. I thought even the Keynesians had distanced themselves from this utterly fallacious tool (no, not DeLong, I’m talking about the Phillips Curve). Anyways, this is the kind of “reasoning” it takes to get onto any political team as an economic adviser–just fudge the data to help them spend more (Hmm, reminds me of another politically motivated “scientific” research team that helped a certain former vice president win a nobel peace prize and become a billionaire).

Ohhh Henry November 25, 2009 at 12:14 pm

“Let say we accept the dubious 1 million jobs created for $787 billion. We have 15 million people out of work – closer to 25 million if you use U6. It would take 15 years and close to $12 trillion to create jobs for these people. OK, this analysis is suspect, but is it any less ridiculous that the so called official analysis?”

Adjusting for population growth and inflation, I suspect that the above scenario is a pretty good description of the policies of the USA in the 1930s right through WWII. Do you see where their logic will lead us? One and a half decades of economic misery, millions of people killed, and a permanent ratcheting upward of the size of government. After which the Keynesians will declare victory and denounce free market theories as dysfunctional relics.

Jobs are Costs November 25, 2009 at 2:12 pm

Jobs aren’t benefits. Jobs are costs. Decreases in time are costs. Increases in goods and services are benefits.

DD November 25, 2009 at 2:20 pm

Why are we even attempting to debunk his fallacious accounting that is part of what is a fallacious theory to begin with?

This is giving him way too much credit. His knowledge in economics is no greater then your average dog randomly picked off the street so why waste all this effort.

Jonathan Finegold Catalán November 25, 2009 at 4:44 pm

On his blog, one of the comments says something about Okun’s coefficient, in regards to the $110,000 figure. I don’t know if that helps in finding out where the figure comes from. It certainly didn’t help me.

Alvaro November 25, 2009 at 6:46 pm

@David Hayes, @Eko

It’s not called “adding apples and oranges”, it’s called Macroeconomics.

Barbarossa November 26, 2009 at 1:15 am

It’s not called “Macroeconomics,” it’s called “Makeupeconomics.”

Konstantin November 26, 2009 at 3:31 pm

The comments on their blogs are censored though not totally but still censored. Krugman’s is the worst.

NS December 1, 2009 at 7:11 pm

The $110,000 looks like the Fed expenditure with a multiplier applied: $92,000 * 1.2 = $110,000. Even if you believe in such a multiplyer effect, you would be double counting the taxes (it either reduces the size of the multiplyer if it reduces the cost to tax payers or is part of the multiplyer if it is spent by the government) and the $50,000 (this seems like a transfer payment and should implicitly be incorporated in the cost per job or, at least, offset in the multiplyer or efficiency discount).

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