Thursday, November 17, 2016

Why did the dog cross the street?

Krugman discussing multiupliers:
Wren-Lewis argues for a multiplier of around one, based not on empirical evidence but on a priori reasoning.
Suppose the government builds a school; thenmy starting point is to note that because the increase in government spending is temporary, any impact on pre-tax income or taxes will be relatively small relative to a consumer’s lifetime income. As a result, aggregate consumption is likely to change either way by an amount that is a lot less than the cost of the school.

Good work, Simon, the children get on the school bus to go to school.

It is a multiplier of one, likely, because few of the parents planned to drive the kids, so they got together and bought a bus.

It has to do with taxes, yes Krugman, the parents in question calculated the hassle of each of them driving the student, and concluded a single bus works better.  At least that was true until busing became a political issue.

The prior issue, is the government multiplier always 1.5? No, it is a variable, the professors at UC Berkeley were simply trying to fix prices, and got caught.

 Consider a similar example. A group of workers in San Jose decided to drive to work. Then why did they build a trolley system to haul around mostly empty steel at a great global warming cost? Because they pay indirectly, environmentalists are not that stupid, their plot to heat the planet would never work if San Jose voters knew the plot.

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