Althouse: "UW-Madison adds $12.4 billion a year to economy, study finds."

March 30, 2011

"UW-Madison adds $12.4 billion a year to economy, study finds."

"UW-Madison Chancellor Biddy Martin used the study to highlight why the university needs a new operational model, which it would get if a proposal in Walker’s budget is approved by the state Legislature.... For every $1 of state tax investment to the university, there is $21.05 in economic activity in the state."

120 comments:

Moose said...: I remember living in Ann Arbor. The U of M contribution to the local economy was always the gun they held to the head of City government to get what they wanted when they wanted it. And to overlook inconvenient things...; 3/30/11, 2:36 PM
bagoh20 said...: Well if that is true, then we should give UW-Madison all the money. Cut everything else to zero.

I have no doubt that this study, if extrapolated, would find that the entire university system accounts fro 230% of the U.S. economy.; 3/30/11, 2:41 PM
Original Mike said...: How does that work, Moose? They're not the Minnesota Vikings. The University of Michigan can't exactly leave town.; 3/30/11, 2:41 PM
coketown said...: I'll go ahead and call a multiplier of 21.05 absolute bullshit.; 3/30/11, 2:45 PM
Boxty said...: Reminds me of those studies that say housewives are worth $130,000 in equivalent salary for all the household chores that they do. Um, no.

http://tinyurl.com/4ccryy3; 3/30/11, 2:45 PM
dmoelling said...: I noticed that WARF was included. Do they still get royalties from WARFARIN (rat poison, human blood thinner)? Or did they come up with new stuff?; 3/30/11, 2:46 PM
m stone said...: $21.05 in economic activity in the state for each $1 is not revenue; it is money exchanged. It certainly is not production, unless you count undergraduates and graduates who "protest."; 3/30/11, 2:53 PM
Bushman of the Kohlrabi said...: This is a mistake. They really meant to say 100 Billions Dollars!"; 3/30/11, 2:54 PM
Fred4Pres said...: It is fair to say UW Madison has a huge impact on Madison economically, but I doubt it is that much.; 3/30/11, 2:55 PM
bagoh20 said...: Once you have bought your groceries and paid your mortgage, nobody can justify keeping any of the remainder of their own money when this incredible opportunity exists. Where else can you spend $1 and get $20 back? I'm writing my check now and I don't even live in Wisconsin. I want in on this on the ground floor.; 3/30/11, 2:55 PM
Original Mike said...: "I'm writing my check now and I don't even live in Wisconsin."

I'd be happy to accept your gift. Let me send you the paperwork.; 3/30/11, 2:58 PM
James said...: Wow...that's a Pelosi-like multiplier effect.

http://politicalticker.blogs.cnn.com/2010/10/06/pelosi-fires-back-at-gingrich-over-food-stamps/

"At a press conference in her home town of San Francisco, Pelosi explained that the program’s multiplier effect –the amount of money generated in the local economy as the result of the subsidy– far exceeds the nearly $60 billion spent this year by the federal government and is a sure-fire way to stimulate the economy. For every dollar a person receives in food stamps, Pelosi said that $1.79 is put back into the economy. The U.S. Department of Agriculture cites an even higher figure of $1.84."; 3/30/11, 2:58 PM
Expat(ish) said...: But wait, what about the carbon load pricing?

lalalalala

Anyone read Dilbert lately?

_XC; 3/30/11, 2:59 PM
Alex said...: Absolute bullshit. I can't believe Althouse is getting this desperate.; 3/30/11, 3:01 PM
bagoh20 said...: I bet the tulip crop this year is gonna be great in Madison?; 3/30/11, 3:01 PM
Original Mike said...: "For every dollar a person receives in food stamps, Pelosi said that $1.79 is put back into the economy."

That's believable. The person probably upgrades from a pint to a quart.; 3/30/11, 3:02 PM
MadisonMan said...: I'd be more interested in comparisons between the various Universities. Which University generates the most activity per dollar spent?; 3/30/11, 3:04 PM
bagoh20 said...: ""For every dollar a person receives in food stamps, Pelosi said that $1.79 is put back into the economy."

I think she meant that 1.79 is put into the government for every dollar received by the needy. It's an easy and common mistake to make.; 3/30/11, 3:05 PM
James said...: So why don't all of us quit our jobs and go on food stamps?; 3/30/11, 3:05 PM
Anonymous said...: "Reminds me of those studies that say housewives are worth $130,000 in equivalent salary for all the household chores that they do. Um, no."

If you're a single parent with babies/young kids you can try to do the work yourself, or you can hire people.

If you don't have time to do the work yourself you need the following:

1) full time nanny/ full time day care (a housewife gives more of a quality nanny experience then a day care. And nannies cost more.

2) cook

3) driver (Drive kids to swim lessons - you either got to do it yourself during work hours or pay somebody else to do it.); 3/30/11, 3:06 PM
bagoh20 said...: "Which University generates the most activity per dollar spent?"

HKU Hard Knocks University; 3/30/11, 3:07 PM
Freeman Hunt said...: You can hire the same person to nanny, cook, and drive, and that person doesn't cost $130,000 per year.; 3/30/11, 3:08 PM
MadisonMan said...: I do know that Wisconsin has been in the top 5 Universities for attracting external grant monies for longer than any other university (We see a chart to this effect every year). Excepting Johns Hopkins with its Applied Research Lab.

It's very interesting to see other universities come and go on the top 5 chart. But the UW has a great mix of science and health that helps it generate consistent external funds.; 3/30/11, 3:08 PM
Econophile said...: No honest economist could take "economic impact" figures and "stimulus multipliers" seriously at all. Complete nonsense--bizarre accounting is not equivalent to economic analysis.

I support much of what Martin wants to change with the University operations, but suggesting a magical 2000% return is not helping the argument.; 3/30/11, 3:14 PM
Joe said...: (The Crypto Jew)

In fact there is something even better for the local economy and investors. I have a study that demonstrates that IF you give the Crypto Jew $1 it generates or saves $30! Send me your money! Of course if you want to research this, please send me a SASE with $5 for the research report.; 3/30/11, 3:17 PM
shiloh said...: Living in Kent most of my life, if Kent State closed, the city would go belly-up.

Coincidentally having been stationed at NAS Norfolk and Dam Neck Fleet Training Center, Va. Beach, if all the Army, Navy, Marine, Air Force bases closed/left town the Norfolk/Va. Beach area would be hurtin' for certain.

Again, supply and demand ...

carry on; 3/30/11, 3:19 PM
Rob said...: Clearly the government should spend only on colleges and sports stadiums.; 3/30/11, 3:19 PM
DADvocate said...: suggesting a magical 2000% return is not helping the argument.

Indeed. It's possible you could double the money in and still on get $12.4 billion back. If making money was as easy as they make it sound, we'd all be living in the land of milk and honey.; 3/30/11, 3:23 PM
Carol_Herman said...: With students spending most of it on beer and pizza. And, transportation costs, in and out of campus.; 3/30/11, 3:26 PM
coketown said...: Incidentally, there are studies showing that the multiplier for tax cuts (boo! hiss!) is greater than for spending--but Keynes understood both to be stimulative. And there are studies showing the opposite. The lesson to be learned is that one to a handful of studies don't prove anything. And economics is still the Dismal Science, narrowly beating out meteorology.; 3/30/11, 3:29 PM
Original Mike said...: "A dollar in tax cuts is a dollar taken out of the economy"

Laura D'Andrea Tyson; 3/30/11, 3:31 PM
Kevin said...: I thought that consumption of Pabst Blue Ribbon added $12.4 billion a year to Wisconsin's economy...; 3/30/11, 3:32 PM
Alex said...: No the issue is there is X amount of dollars at the moment. Who can generate more wealth - private business or government entity? Which is more efficient and driven by markets?; 3/30/11, 3:33 PM
Kevin said...: The Chican@ and Latin@ Studies Program at UW-Madison alone must add at least $5 billion a year to the economy...; 3/30/11, 3:36 PM
I'm Full of Soup said...: Bago said:

"Well if that is true, then we should give UW-Madison all the money. Cut everything else to zero."

Precisely! [a word economists rarely use]. Heh.; 3/30/11, 3:39 PM
Anonymous said...: "You can hire the same person to nanny, cook, and drive, and that person doesn't cost $130,000 per year."

Full time cook? good deal - most people won't cook and nanny for the family. My relatives in Latin America have to pay two separate people to separate person to clean/cook and drive.

Here you need to pay a minimum 2 -2.5K a month for a full time nanny w/out cooking or cleaning.; 3/30/11, 3:39 PM
I'm Full of Soup said...: The article calculates a ration of the state subsidy to the GDP and and then assumes the $1 creates $21yet offers no proof of a causal relationship.

Btw- if the $12 Billion is correct, that represents about 5% of the state's entire GDP.; 3/30/11, 3:46 PM
Econophile said...: @Coketown:

You're crushing me with the Dismal Science and meteorology comment.

Economists in fact have a rather beautiful way of understanding human decisions and interactions. It's actually very broad and more like sociology done properly and Marxist-free. No one doing academic work in the field is in the business of predicting mortgage rates or unemployment rates or anything at all. That's only done on CNBC.

And as for the dismal part, there are more Julian Simons than Malthusians.; 3/30/11, 3:51 PM
Automatic_Wing said...: Does that math only work for tax dollars or is an out of state law student paying $38K tuition supposed to generate $800K in economic activity for Wisconsin?; 3/30/11, 3:57 PM
Calypso Facto said...: So if we eliminate state contributions to the UW, our return becomes infinite!; 3/30/11, 4:02 PM
Anonymous said...: Jeez, if we break there windows, we could employ even more glaziers.

In fact, if we burn down the college, they'll have to build a new one, thus increasing the economic impact even more.; 3/30/11, 4:02 PM
Revenant said...: That seems unlikely.; 3/30/11, 4:11 PM
madAsHell said...: Wow...The Boeing Co. in Seattle is usually quoted as a multiple of 7. Every 1 Boeing worker creates 7 local jobs.

Why do we accept studies?....and never ask who sponsored the study? It seems that studies are always written by anonymous.; 3/30/11, 4:11 PM
Peter Friedman said...: Alex: "Who can generate more wealth - private business or government entity?"

How can all of you not understand that a mix of the 2 is optimal for society as a whole?; 3/30/11, 4:12 PM
Alex said...: How can all of you not understand that a mix of the 2 is optimal for society as a whole?

How can you not understand that the balance is totally out of whack right now? Oh and I fail to see how public sector unions generate any wealth for society.; 3/30/11, 4:19 PM
rhhardin said...: I don't understand the study, but it probably means that the lure of taxpayer funding for the Unversity causes transactions, e.g. buying lunch, to occur in Madison rather than elsewhere.

It does not cause new lunches to be purchased.

It does not increase the economy.

It does not raise the standard of living.

To the extent it represents taking away earnings to pay the subsidy, it certainly reduces the standard of living added up over a large enough segment of the population.; 3/30/11, 4:24 PM
ddh said...: Wow. Somebody has the nerve to claim a multiplier effect of 21 for spending on the University.

Back in the 1970s, when Nixon said "We are all Keynesians," economists generally thought the multiplier for government spending was 3. Several decades of further research suggest more even more modest results(Romer and Romer, 2007; Ilzetzki, Mendoza, and Vegh, 2010). Some estimates say that one dollar of government spending produces only 70 cents of economic activity, losing 30 cents in the bargain.

Northstar's estimate certainly is an outlier, but it is even more convenient for the Chancellor. The question is, why should anyone believe it?; 3/30/11, 4:28 PM
Matt said...: Look, some dumb [Republican] politician claims he can't make ends meet on his 174k a year.

Now the GOP is demanding the video of his making the claim be taken down. Ha! ha!; 3/30/11, 4:29 PM
Econophile said...: @Peter Friedman:

Reality prohibits me from "understanding" how the production of government entities can be superior, I'm afraid.

Of course, if by a "mix" you mean that government enforces contracts and such, I don't think many would disagree with you there. Otherwise, even to show some "mixed" theoretical optimum you'd be required to assume government omniscience. If you don't see why that would be a problem, then, well, try harder.; 3/30/11, 4:30 PM
Sigivald said...: From the article: the university, UW Hospital and Clinics and related groups support 128,146 jobs.

Yeah, so you throw a bunch of money around and there are jobs.

But doesn't the hospital charge people for services?

And can't we not conflate the school, and the hospital and clinics?

Sure, it's a teaching hospital and all that, but it's not free, and indeed one assumes that it's competing against (either directly or by preventing the opening of) private hospitals that would also... employ people.; 3/30/11, 4:42 PM
dbp said...: "For every $1 of state tax investment to the university, there is $21.05 in economic activity in the state, the study found."

I can beat that easily: For every Dollar I spend at McDonald's, they make around 100 million Dollars in profit.; 3/30/11, 4:50 PM
Bruce Hayden said...: You can hire the same person to nanny, cook, and drive, and that person doesn't cost $130,000 per year.

What about sex then? Do they put out, or do you need someone else for that? That would seem to screw up the calculations a bit (no pun intended).; 3/30/11, 4:54 PM
Triangle Man said...: How can that be? A bunch of commie professors suckling at the government tit, indoctrinating (and probably having sex with) the unsuspecting youth can not possibly be anything but a drag on the economy.

The State provides 18% of UW - Madison's operating budget, but this will drop to something much less after taking out $125 million in the proposed budget.

That's still taxpayer money being spent on communist fornication. Where is the payback?

Oh, the UW hospitals and clinics are included.

Maybe there could be some economic activity surrounding Badger sports too.

As MadisonMan pointed out the University attracts a huge amount of external research funding which gets spent in the state.

UW - Madison is one of the top academic intellectual property producers, consistently in the top 10 for patents generated in Universities.

The list of WARF's technologies is here. Too bad they passed on Botox!

Don't forget the start-ups with UW Madison links.; 3/30/11, 4:57 PM
Triangle Man said...: Wow. Somebody has the nerve to claim a multiplier effect of 21 for spending on the University.

With tax dollars being 18% of the operating budget doesn't the multiplier have to be at least 1/.18 = 5.55?; 3/30/11, 5:03 PM
traditionalguy said...: The Football team makes money. And the student loans flowing into the University for tuition are a giant private stimulus using borrowed funds. There is also the profit from drug possession arrests plead out to fines. And then there is the Beer Tax. Ok, I do see at least 12.4 billion added to the economy. Professor Althouse needs a huge raise.; 3/30/11, 5:05 PM
dbp said...: As MadisonMan pointed out the University attracts a huge amount of external research funding which gets spent in the state.

Sure. And that external funding is almost all from the federal government. That money doesn't come from heaven, it is paid by the people of the United States and Wisconsinites pay a proportional share of it.; 3/30/11, 5:05 PM
Thorley Winston said...: For those interested, a summary of a 2002 report by the same group on the University’s “economic impact” can be found here.

Long story short, the way they got to their numbers is by taking a rather loose view of what constitutes the “economic impact” of the University. For example, if a University employee spends a dollar of their salary at a business, it gets counted as a dollar of the University’s “economic impact.” If that same business in turn spends a dollar, that too gets counted as part of the University’s “economic impact” and so forth.

If it seems familiar, it’s probably because it’s similar to the methodology used by the Obama administration to calculate the “jobs saved or created” by the “stimulus.” You know the one where if “stimulus” funds are used to buy a pair of shoes from a store that employs six people, then those six jobs are counted as jobs that are “saved or created” because of the “stimulus.”

From what I can tell the consulting firm specializes in generating “economic impact studies” for their clients (one of which is the University of Wisconsin-Madison whose positive testimonial of their services is featured quite prominently on their website) and the studies always seems to show a rather generous multiplier effect. I wonder why that is?; 3/30/11, 5:10 PM
Triangle Man said...: @dbp

Given Governor Walker's apparent distaste for federal funds, I can see your point, but it is economic activity generated in the state by the University nonetheless. Not to mention the general benefit to society from the results of the research that is funded.

Would you discount the economic activity of a major defense contractor on the same grounds?; 3/30/11, 5:11 PM
Original Mike said...: "Sure. And that external funding is almost all from the federal government. That money doesn't come from heaven, it is paid by the people of the United States and Wisconsinites pay a proportional share of it.""

What's your point? If we're going to start trashing the concept of a research University (and I know some here will jump at this opportunity to do so), we are approaching "cutting off our nose to spite our face" territory.; 3/30/11, 5:11 PM
AllenS said...: Oh, bullshit. They're spending $11 to save $10.; 3/30/11, 5:14 PM
Anonymous said...: Lies, damned lies and statistics.

wv: causc I don't believe it.; 3/30/11, 5:15 PM
garage mahal said...: What's your point?

HULK SMASH LIBRULS; 3/30/11, 5:18 PM
ken in tx said...: This is like when a military base uses the multiplier effect to tout how much they mean to the local economy. It's BS. Every time they close a base the local economy explodes. Look at Myrtle Beach SC. When I was working on my MBA in Aviation, one of my professors, who was an administrator of a local airport, said that any time a non-profit organization invoked the 'multiplier effect', they were lying. Non-profits don't create wealth, they just move it around,; 3/30/11, 5:18 PM
Anonymous said...: I love these government "multipier affect" formulas.

Combined with Pelosi's "there is no faster way to stimulate the economy than unemployment checks"...

The road to paved roads of gold requires laying everyone off, and having them donate their unemployment checks to the University of Wisconsin.

WINNING; 3/30/11, 5:24 PM
dbp said...: I have nothing against the concept of a research based university--I did research at one for eight years before going into the private sector.

My point is that this multiplier of 21 should rightly be seen as the most purely distilled BS.; 3/30/11, 5:25 PM
traditionalguy said...: There is a big buzz these days for college administrators to show that their colleges are "free" because their costs are offset by benefits to the State. I suspect that the statistics are being done using Michael Mann's patented hockey stick computer program...and behold there is a sudden increase in the past few years. In Wisconsin's case there is some truth in that way of looking at things...the State gets free a Professor Althouse Blog every day of the year.; 3/30/11, 5:26 PM
former law student said...: Trouble is, $1.6 billion of that goes to lattes and other espresso drinks.

Coincidentally having been stationed at NAS Norfolk and Dam Neck Fleet Training Center, Va. Beach, if all the Army, Navy, Marine, Air Force bases closed/left town the Norfolk/Va. Beach area would be hurtin' for certain.

Vallejo, CA went bankrupt after Mare Island closed. Even the Horse and Cow relocated, first to Sandy Eggo and then to Bremerton, WA.; 3/30/11, 5:27 PM
Original Mike said...: I'm not defending this study. First off, I'd have to read it and I'm not going to waste my time. Second, I have no faith in these types of calculations either. You can get any number you want with the right assumptions.; 3/30/11, 5:28 PM
Thorley Winston said...: What's your point?

I think his point is that there is a difference between wealth that is created and wealth that is redistributed.

If one wants to argue that we should support more funding for a research university because the research leads to innovations that generate X dollars in new wealth from new and improved technologies, that’s quite a bit different than saying that we should support more funding for a research university because the federal government will take money from people living in other parts of the country and send it to Madison, Wisconsin.

I suspect BTW that if these “economic impacts reports” ever did more than serve as a glorified PR piece for their clients and actually did some cost-benefit analysis, we could come up with a more meaningful study showing which parts of the University-Wisconsin actually lead to wealth creation versus just shuffling money around.

Of course if we did that, it might actually show support for less higher education spending.; 3/30/11, 5:34 PM
Craig Howard said...: What economic rubbish.

To the extent that student tuition money comes from out of the area, the university can be said to contribute to the economy. But to then go on and add in spending multipliers is to use the same economics which the administration used to justify the stimulus package.

Of course, it's not just Madison, they all do it. If UB had the impact on Buffalo it claims it does, we'd be Dallas North.; 3/30/11, 5:46 PM
shiloh said...: Re: College football revenue:

Penn State Univ. $70,208,584.00
Ohio State Univ. $63,750,000.00
Univ. of Michigan $63,189,417.00
Univ. of Iowa $45,854,764.00
Michigan State Univ. $44,462,659.00
Univ. of Wisconsin $38,662,971.00
Univ. of Minnesota $32,322,688.00
Univ. of Illinois $25,301,783.00
Northwestern Univ. $22,704,959.00
Indiana Univ. $21,783,185.00
Purdue Univ. $18,118,898.00

Stadium seating capacity:

1) Michigan (108,933)
2) Penn State (107,008)
3) Ohio State (105,261)
4) Texas (101,175)
5) Tennessee (99,220)
6) Univ. of Georgia (92,746)
7) LSU (92,489)
8) Alabama (92,012)

Football Expenses:

Ohio State Univ. $31,763,036.00
Univ. of Wisconsin $22,041,491.00
Penn State Univ. $19,780,939.00
Univ. of Iowa $18,468,732.00
Univ. of Michigan $18,328,233.00
Michigan State Univ. $17,468,458.00
Univ. of Minnesota $17,433,699.00
Northwestern Univ. $15,733,548.00
Indiana Univ. $12,822,779.00
Purdue Univ. $11,821,265.00
Univ. of Illinois $11,092,122.00

As the article says the Big Ten Network revenues is also a cash cow. Just like in politics $$$ rules and one of the main reasons Jim Tressel will probably survive at Ohio State, plus he's beaten Michigan 9 out of 10 times ~ (7) in a row ...

Trivia:

From 1958 to 1971 Ohio State was #1 in college football atendance when their seating capacity was 80,000+. Not until Bo Schembechler was hired did Michigan consistently start to fill their 100,000+ seat stadium.

Did I mention college football is big business and a religion in TX.

carry on; 3/30/11, 5:48 PM
PaulV said...: Multiplier, Multiplier, Multiplier,
they cry, but there is no Multiplication. The Second Dip Recession has already started. The next sounds you hear from Madison will be public employees shouting GiveMe. GiveMe, GiveMe. If the average tax rate is 30% the multiplier is 0.70, better known as a divisor of 1.4. Good enough for government work.; 3/30/11, 5:55 PM
Phil 314 said...: I think both Shiloh and FLS are advocating for opening more military bases.; 3/30/11, 6:10 PM
chickelit said...: You all have very short memories. 10 or 15 years ago there was nothing but bitching and moaning about how low teacher's salaries at nearly every level were. And they were right--they really were.

So they they all got boosted and raised via Public Service Unions or what have you until they exceeded what the public perceives as being in line with what people make in the private sector. It doesn't help that many research faculty have very little respect for industrial research (aside from what they can scarf as consultants or fanagle as grants).

That's the fundamental problem right there: perceptions. The UW and other research universities have a problem right now with perceived overcompensation. Instead of shouting "but we deserve it!" they, just need to take a couple years of no salary growth on the chin (thanks Ben Bukkake) and get through the worst of it.

Sheesh.; 3/30/11, 6:15 PM
PaulV said...: Slightly faster Rail is known to be major economic drag, sucking money out of the economy with subsidizes. Good idea to reject that money loser.
If there is not enough demand for direct bus service from Madison why waste money providing inefficient rail?; 3/30/11, 6:15 PM
chickelit said...: I mean, I look through Science (the premier, flagship US science research publication) every week and there is always some dire editorial or letter to the editor about how science funding has to increase quickly and forever. There is never a serious discussion or even mention of containing costs or reducing outlays or even thinking about how to not fund every possible thing there is to study. It's just a swim like a shark or die mentality.; 3/30/11, 6:22 PM
Anonymous said...: "What about sex then? Do they put out, or do you need someone else for that? That would seem to screw up the calculations a bit (no pun intended)."

Yeah - we forgot about that. :)

hmm - this is really going to add up.

1) prostitute/ gigolo/ mistress/ pool boy

2) If you want to make your own baby you also need to pay a surrogate. Now I bet this adds up! (And purchase eggs or sperm, depending on your gender.); 3/30/11, 6:27 PM
shiloh said...: I think both Shiloh and FLS are advocating for opening more military bases.

You're faux assumption ;) notwithstanding, the Vietnam War was very good for the American economy just like WWII. Besides decreasing the employment pool by 60k, America's economy was spurred by manufacturing in the '60s/'70s ...

Whereas nowadays "our" economy has turned into a service economy and increasing the war production would not necessarily be a good thing.

ie America doesn't make anything anymore, just billionaire/millionaire "movers and shakers" moving money around.

hmm, how much $$$ did cheney/bush waste/lose/misplace in Iraq.

but, but, but Halliburton and Blackwater er Xe were booming industries ie outsourcing is the ticket, eh.

>

From Madison to Xe :); 3/30/11, 6:27 PM
Chip S. said...: If every industry in the state hired this consulting firm to perform a similar analysis, I believe it would turn out that Wisconsin's state income is actually a very large multiple of itself.; 3/30/11, 6:31 PM
X said...: America's economy was spurred by manufacturing in the '60s/'70s ...

the 70's were great. inflation, wage & price freezes, odd & even days, cardigans...; 3/30/11, 6:40 PM
former law student said...: Your faux assumption ;) notwithstanding, the Vietnam War was very good for the American economy just like WWII.

On that theme, Hitler's military buildup pulled Germany right out of the Depression -- suddenly anyone who wanted a good job could get one. Of course, first he dissolved the trade unions and kicked the lefties (Social Democrats, Communists) out of government.; 3/30/11, 6:49 PM
Henry said...: Every time a tenured professor breaks a window, 21 glaziers are employed.; 3/30/11, 6:51 PM
Dark Eden said...: "You can hire the same person to nanny, cook, and drive, and that person doesn't cost $130,000 per year."

I see a good recession proof job. Hire yourself out to cook, clean and drive for families for the low low price of $100,000 per year!

You could probably get a group discount and do a full cul-de-sac community of say three or four families and make $300-$400 k a year!; 3/30/11, 6:55 PM
Synova said...: Alex: "Who can generate more wealth - private business or government entity?"

"How can all of you not understand that a mix of the 2 is optimal for society as a whole?"

I probably don't understand that because I don't know to what you are referring.

Alex specified "generate more wealth." I missed anyone suggesting an anarchy, so... is the "mix" supposed to be best for generating wealth? Or is the "mix" simply a reference to public sector police and building inspectors?

It really is not obvious, so perhaps you'd like to actually make an argument to explain how more wealth is created with a mix of both private and public employers than would be created by private employers alone.; 3/30/11, 6:57 PM
Chip Ahoy said...: My dad tells a story which I take for truth because my dad never tells story stories, just real ones.

In a small southern place associated with an air base, probably Winston Salem, possibly Charleston NC, or Bedford or maybe Cape Charles VA, the mayor of the place complained to the Commanding Officer about the airmen's disagreeable behavior off base. This wasn't a one-time complaint, but rather an ongoing issue. He became a serious nag about it. He had a bug up his bum about the airmen. Finally the Commander had it up to here * indicates forehead level with slicing motion * so he decided that for the next several months his payroll would be issued entirely in $2.00 bills. The effect was to flood the town with the less desirable currency. Eventually all transactions were made with 2s. The mayor then complained about that. The Commander persisted. The mayor complained again. And again. Finally, the mayor goes,

"OKAY, FINE ! PLEASE, STOP IT. I APOLOGIZE. I GET IT. YOUR POINT IS MADE. YES, I SEE NOW. THE SPENDING OF YOUR MEN IS ESSENTIAL TO THE SURVIVAL OF THIS TOWN."

Or something like that. But this does little to support or detract from the point being made in this study and refuted in these comments. These were still all tax dollars that were collected from elsewhere and spent in this town.; 3/30/11, 6:58 PM
Synova said...: Why is everyone fixated on the 1 to 21 ratio and not the interesting notion that Walker's budget proposal that includes greater autonomy and local control of UW-Madison's budget would allow a needed "new operational model" for the school?

One guy is like, Walker is going to cut our budget; and the other guy is like, Walker is going to give us freedom and flexibility to generate a new operational model. And UW-Madison is like, yay, we get to manage our own affairs to suit us best; and UW is like, no way, we want to stay the boss of you!

Since empowering local "government" units to manage their own budgets is what Walker has been on about since the first, it seems sort of significant.; 3/30/11, 7:07 PM
Synova said...: Chip... when I heard it, it was Biloxi. ;-); 3/30/11, 7:08 PM
Synova said...: And silver dollars.; 3/30/11, 7:09 PM
Ignorance is Bliss said...: UW-Madison adds $12.4 billion a year to economy, study finds.

So how much of that is your Amazon portal?; 3/30/11, 7:17 PM
chickelit said...: This comment has been removed by the author.; 3/30/11, 7:27 PM
chickelit said...: Synova said...
And silver dollars.

Well that pegs it as at least pre-1964 economics. Things are different now. :)

I don't know what it would take to disabuse people of the notion that private wealth creation = public wealth creation. Somebody has conflated the two. I think we survived with the model for so long because public servants traditionally earned less than private sector equivalents.; 3/30/11, 7:28 PM
T J Sawyer said...: Now let's think about this for a minute.

The State invests 1$ and that generates $21 of economic activity. The federal government captures about $4 of that in the form of taxes. (20%)

We have found both a solution to the budget deficit and a perpetual motion machine!

Here's to economic studies.; 3/30/11, 7:35 PM
traditionalguy said...: The jobs in barber shops in Fayetteville, NC alone is enough to keep that town's economy comfortable. But on 36 hours notice about 20,000 Airborne Troops go away. That can be worse than Detroit.; 3/30/11, 7:36 PM
Titus said...: I went to Mt. Horeb this weekend and it was so cute. They have homemade lefse!!!

Went to Bistro something or another. It was good.

Lots of trolls in Mt. Horeb.

I want to go to that Hooterville Restaurant in Blue Mounds.; 3/30/11, 7:36 PM
Henry said...: I think the short answer is "economic activity is not the same as economic productivity."

Inflation causes a lot of economic activity too. When you print bills they circulate.; 3/30/11, 7:37 PM
Titus said...: Oh and I want to go to this another restaurant in Monticello that is supposed to be fab.

Definitely New Glaurus too.

That area is so much nicer than Waunakee.; 3/30/11, 7:37 PM
Revenant said...: "Our study has found that we are enormously beneficial to the people who give us money" is among the less credible academic findings.; 3/30/11, 7:40 PM
David said...: Freeman Hunt said...
You can hire the same person to nanny, cook, and drive, and that person doesn't cost $130,000 per year.

It does if they are in government. How much do you suppose Bob Love, Obama's personal assistant, costs the taxpayers every year?; 3/30/11, 7:41 PM
Titus said...: In India my husband's cook, maid, driver and garden dude costs $400. a month for the whole crew.

They come everyday too.; 3/30/11, 7:44 PM
Synova said...: Oh, I do think that the multiplier thing is ridiculous but the impact of not having the university there would be devastating even if the greater part of it is funds brought from elsewhere and spent in Madison... it helps Madison.

So does any other large employer.

My husband worked at Lucasfilm for a few years, the time-frame was the same as Star Wars episodes 2 and 3. There was a lot of snark then about his profits and particularly merchandising, as though it was all rather *tacky*. Never mind that no one is forced to purchase a Darth Vader helmet and plastic light saber. I recall one snide remark about merchandising made to my husband's back when he was wearing his IT Dept "letter jacket" to BayCon. I suppose I was sensitive to the snooty, down-their-nose, attitudes about George Lucas's success and the huge box-office the movies were generating, not to mention the toys!

But what these snooty sorts who didn't think anyone *deserved* to make unseemly amounts of money missed entirely was the payroll.

We went to a few "company" parties, Fourth of July picnic or the Holiday party at the Marin convention center... thousands of people all in one place. It was mind boggling to think of all those salaries flowing into the local community for all of the things people purchase every day... their homes and cars and kid's schools and no end to groceries and entertainment!

Who needs a *multiplier?* Just add.

I don't think that, in the end, movies are much different than government. What they create is ephemeral so it's mostly just shifting funds around. Granted, it's all voluntary purchases rather than legal confiscation doing the moving, so it's not entirely the same.

Imagine if Lucas converted his box office and toy sales to silver dollar payroll. Would any of the locals have been able to maintain that snooty notion that the amounts of money involved were unseemly?

(The snots fussing on the internet would still fuss, but that's what the internet is for.)

I realize that even the left thinks that Michael Moore is a boob, but he's not the only one who thinks that we could just take the money we need from those who have unseemly wealth.

It would be nice if even more people realized he was a boob.; 3/30/11, 7:47 PM
David said...: Let's say Althouse's overall cost to the system (salary + benefits + office + other stuff) is $200,000.

That means Althouse is worth over $4,000,000 per year to the City of Madison.

Who wants to tell Shankman?; 3/30/11, 7:47 PM
Titus said...: $400 is like r17600.

thank you.; 3/30/11, 7:48 PM
shiloh said...: Synova, may the force be w/you ... always. :); 3/30/11, 7:53 PM
shiloh said...: That means Althouse is worth over $4,000,000 per year to the City of Madison.

Does goodwill ;) enter into the equation ...; 3/30/11, 8:01 PM
Smilin' Jack said...: For every $1 of state tax investment to the university, there is $21.05 in economic activity

Economic activity = global warming.; 3/30/11, 8:02 PM
Freeman Hunt said...: Full time cook? good deal - most people won't cook and nanny for the family.

Yes, my parents did this for a time when I was a child, and the same woman then worked for another family doing the same thing. Basic babysitting, driving children to things, grocery shopping, thorough cleaning, and cooking (just dinner because no one was around during the school day.)

In today's money, it cost right around $2k per month.

If you had babies around, you might need another person. Then we're at $4k per month or $48k per year. That's still not even close to $130k annually.; 3/30/11, 8:16 PM
Lem Vibe Bandit said...: OT.

Birthers Bombshell!; 3/30/11, 8:31 PM
Lem Vibe Bandit said...: ot

Col. Hollister impersonated Obama, got his draft card, gave it to Orly!

If this guy is tried for purportedly breaking a bunch of privacy laws, will he be allowed to enter into evidence what he has purportedly uncovered? in open court?

Wouldnt that be a hoot?; 3/30/11, 8:48 PM
Freeman Hunt said...: And here is the new birther court filing.

Heh. The crazy builds all the way to the end when it gets to the conclusion that Obama is a secret, radical Muslim who was trained in Pakistan and is now usurping the Presidency.; 3/30/11, 8:59 PM
David said...: Shiloh:

Back to accounting 101. Goodwill is an accounting concept, not an economic concept.

Goodwill is an intangible asset. When you pay a given amount for a basket of productive assets, and the amount you paid exceeds the fair market (or replacement) value of the tangible assets in that basket, the excess is good will. This is why goodwill is so tricky in accounting. It's either a measure of value, or a measure of the foolishness of the buyer.

An economist might conclude that Althouse has hedonic value in excess of her actual multiplier. I'm sure Meade would agree.; 3/30/11, 9:00 PM
Gimli 4 the West said...: Head Start will save the govenment millions. After school programs will save the government millions. Government health care will save millions. All these millions we are saving and still we are broke.

Tell you what, give me millions and I will save the taxpayer by paying for my kids education, health care, after school activities, plus provide their breakfast lunch and dinner.

Wait, I already do that, so the government must owe me since I've paid for my children and everyone else. Holy Cow! I've reach the top of the food chain: I'M A VICTIM!; 3/30/11, 9:09 PM
former law student said...: In India my husband's cook, maid, driver and garden dude costs $400. a month for the whole crew.

I once worked with a Filipina production supervisor who worked weekends at a nursing home to make ends meet. I suggested that was quite a change from her life in the Philippines and asked if she had had a maid.

"Even my maid had a maid," was her answer.; 3/30/11, 9:10 PM
Phil 314 said...: You're faux assumption ;) notwithstanding, the Vietnam War was very good for the American economy just like WWII. Besides decreasing the employment pool by 60k, America's economy was spurred by manufacturing in the '60s/'70s ...

Now I understand Libya.....

yes its all becoming clearer now. Humanitarian aid AND economic stimulus. And those darned French trying to weasel on our action.; 3/30/11, 9:37 PM
KCFleming said...: Statists do love three card monte economics.

The shills do so want to believe.; 3/30/11, 9:45 PM
shiloh said...: David

Sarcasm 101

Does goodwill ;)

take care; 3/30/11, 10:15 PM
Anonymous said...: "If you had babies around, you might need another person. Then we're at $4k per month or $48k per year. That's still not even close to $130k annually."

Yes, although remember to add in social security unless you're paying under the table.

Where I live you can't get that level of service for 2K a month. Labor is too expensive.; 3/30/11, 10:34 PM
Anonymous said...: "That's still not even close to $130k annually."

Seriously, if we want to actually calucate the labor of a housewife the nanny can't be part time.

We would have to calculate the costs of a

1) live-in full time nanny
2) full time cook (not just dinner)
3) full time cleaner
4) on-call driver - 7 days a week.

I mean, it's not like parents get a day-off. "hey kids, no food for you today!"

I think we all understand that it's very common for both parents do the job today of the "housewife."

If we're going to calculate the real labor costs, we have to add up all of the labor costs for a pretend full-time substitute for child-rearing, cleaning, and cooking.

We can't just add up the costs for a part-time baby-sitter and once-a-day cook and derive a real number. This kind of help is wonderful, but it is not the market price to cover all of the parental work of cooking, cleaning, driving, nursing, bathing, ect.

Pretend both parents die and we have pay to recreate the material experience of that child. We need a nanny for the middle of the night feedings. We need somebody to make breakfast for the first grader heading off to school. That's what we're trying to calculate.; 3/30/11, 10:48 PM
mockmook said...: Freeman Hunt said...
You can hire the same person to nanny, cook, and drive, and that person doesn't cost $130,000 per year. -- 3/30/11 3:08 PM

Tiger's nanny cost him about $100 million...; 3/30/11, 11:54 PM
MikeDC said...: Well, as an economist myself, I want to further the bullshit game that's being started here and say, gee, the government should double it's funding. I mean, if it gets $12B in additional output from just under $600M in spending, why stop there?!

Why not just spend $1.2B and get ourselves an extra $12B?

First question for my class this morning. Second question, will be "What is the 'per capita income' of the 128,146 people cited as employed due to the government's spending"?

Since you aren't in my class, I'll point out that the average job pays just under $97k. So the government is busy "creating jobs" for the wealthy

Heh, the reality, of course, is that this is all a bunch of nonsense. The people are wealthy because they are smart, productive people who largely do in-demand things. They probably contribute about $600M in tax dollars to the state coffers (that's roughly $4600 per person). So in reality, what's going on when you fund them, is you're taking their tax money and then turning around and giving them benefits in the form of various "investments" in their businesses.

So as taxpayers, they're breaking even. Of course, on average, these guys are very affluent, and generally hold the belief that the affluent should be paying more taxes so the less affluent can have more services. Ooops.; 3/31/11, 8:57 AM
Synova said...: "We would have to calculate the costs of a

1) live-in full time nanny
2) full time cook (not just dinner)
3) full time cleaner
4) on-call driver - 7 days a week."

Canuck, are you serious?

In order to find the value of ONE full time person with a variety of responsibilities we have to add up the value of FOUR full time people with discrete responsibilities?

I bet if you ran a business you'd hire a full time receptionist to answer a phone that rang four times a day. The rest of the hours you paid her she could talk to the full time toilet cleaner you hired to scrub the four toilets.; 3/31/11, 8:46 PM