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The · Psychohistorian


Stimulating the recession

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I recently started seeing, up close, the first solid evidence of this year's economic stimulus plan. It was really solid evidence, too: replacement granite curbs at a couple of intersections along our street.

You hadn't realized that granite curbs wore out to the point they needed replacement? Well, neither had I. However, work doesn't have to be produce something useful to stimulate the economy: as long as workers get hired and paid, they have more money to spend than they otherwise would have, and the additional spending will help restore demand for actual useful products. Eventually, so the theory goes, the extra demand will result in rehiring of the workers laid off earlier in the recession, ending the recession.

You may have noticed a slight flaw in this theory: if the laid off workers have already been rehired for the unproductive work, they won't be available for rehiring for actual productive work. Instead, the supply of useful products will continue to be limited, and with more money chasing after the same amount of goods, we'll see inflation instead.

As usual with the economy, government intervention is likely to have the opposite of the intended effect: in this case, it is prolonging actual recession conditions of limited useful production and employment. Fortunately for the government, statistics will be able to cover that up by valuing the new granite curbs as if the old ones had actually worn completely away.
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On July 22nd, 2009 04:23 am (UTC), chenoameg commented:
Did they also update the curb cuts to meet the new standards? That's the major component of the sidewalk work going on around here.
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On July 22nd, 2009 04:38 am (UTC), psychohist replied:
I'm not sure - what are the new standards? I didn't notice any changes to the wheelchair or stroller access, though I didn't look closely enough to see if they added or changed those bumpy rubber pads. They did build out the corner in a sort of half hearted traffic quieting way - not enough actually to slow down the traffic on the street, but enough to make it more difficult for traffic to get around someone waiting to turn left. None of this is what I consider to be productive when the city is having trouble funding everyday services.
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On July 23rd, 2009 07:15 pm (UTC), readsalot commented:
This seems too minor to have anything to do with stimulus grants. I did some searching, and it looks like stimulus money is going toward the Assembly Square rebuild, which is a very large project.

How long did this project take? If it was less than a week, I doubt that it had much impact on the number of workers available for productive work.
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On July 24th, 2009 02:56 am (UTC), psychohist replied:
I agree that particular curb replacement project was a drop in the bucket. I'm more using it as an example of the kind of thing stimulus money is likely to be spent on.

I'm surprised that stimulus money is going toward the Assembly Square project, as the bill wasn't supposed to be paying for anything that the government was going to do anyway. If the mayor somehow managed to finagle things so the money could be used to make up for a budget shortfall, good for him - though given the schedule for a major construction project, it still fails to qualifies as legitimate short term stimulus.

If it's paying for things that the private developers would otherwise have been paying for, then I'm not so happy.
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