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Opertunity Cost of saftey net programs

YoungConserv

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I talked a little about this in a post in the discussion on the presidents Coolidge and FDR, but I wanted to expand on it and get some more feedback on the subject. So for those of you who didn't read the other thread let me recap for you. When talking about this last recession many have said that with out our saftey net programs it would have been a recession. On the surface that seems a reasonable enough argument untill you think about opertunity cost. For those unfamiliar with opertunity cost it is defined as: The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action. So when you say without the saftey net programs we would have had a depression you ignore that the economy would look wholy diffrent if the trillions of capital spent on these programs over 70 years was in the economy for that time period. Now let me make something clear I am not trying to get into the merits of theses safety net programs simply discuss opertunity cost. So let me know what you think would that money of changed the tragectory of our economy or would it have been simply squirled away and been off better in the saftey net?
 
I talked a little about this in a post in the discussion on the presidents Coolidge and FDR, but I wanted to expand on it and get some more feedback on the subject. So for those of you who didn't read the other thread let me recap for you. When talking about this last recession many have said that with out our saftey net programs it would have been a recession. On the surface that seems a reasonable enough argument untill you think about opertunity cost. For those unfamiliar with opertunity cost it is defined as: The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action. So when you say without the saftey net programs we would have had a depression you ignore that the economy would look wholy diffrent if the trillions of capital spent on these programs over 70 years was in the economy for that time period. Now let me make something clear I am not trying to get into the merits of theses safety net programs simply discuss opertunity cost. So let me know what you think would that money of changed the tragectory of our economy or would it have been simply squirled away and been off better in the saftey net?

I think your post is a bit misleading, though I don't think it's intentionally so.

You make it sound as if all the money spent on social safety nets in the last 70 years was what stopped the Great Recession from becoming the Second Great Depression.

But that's not the case.

Over the past 70 years, the U.S. economy has had several significant recessions and economic downturns. The money spent at those times aided the people of those times.

So social safety nets have helped people throughout the 70 years that we've had them, not just now.

Personally, I am in favor of social safety nets. Social safety nets are designed to provide aid to people and, hopefully, get them back to work.

A laissez-faire capitalist system is not. Rather, such a system is designed only to allow businesses to gain the most profit however they can no matter the consequences. And that system doesn't care how many people are unable to find work or are put into poverty because of it.

And I think that the return on investment we get by having people take advantage of social safety nets in a bust cycle outweighs the opportunity costs we suffer by not having that money in use during a boom cycle.

By having that money in reserve during a bust cycle we hedge against economic collapse. It also ensures that we have reserves to invest in entrepreneurs and workers who can use that money to re-fortify our economy.

Without social safety nets, it is unlikely that we would be able to hedge that risk. So I'm all for social safety nets.
 
I think your post is a bit misleading, though I don't think it's intentionally so.

You make it sound as if all the money spent on social safety nets in the last 70 years was what stopped the Great Recession from becoming the Second Great Depression.

But that's not the case.

Over the past 70 years, the U.S. economy has had several significant recessions and economic downturns. The money spent at those times aided the people of those times.

So social safety nets have helped people throughout the 70 years that we've had them, not just now.

Personally, I am in favor of social safety nets. Social safety nets are designed to provide aid to people and, hopefully, get them back to work.

A laissez-faire capitalist system is not. Rather, such a system is designed only to allow businesses to gain the most profit however they can no matter the consequences. And that system doesn't care how many people are unable to find work or are put into poverty because of it.

And I think that the return on investment we get by having people take advantage of social safety nets in a bust cycle outweighs the opportunity costs we suffer by not having that money in use during a boom cycle.

By having that money in reserve during a bust cycle we hedge against economic collapse. It also ensures that we have reserves to invest in entrepreneurs and workers who can use that money to re-fortify our economy.

Without social safety nets, it is unlikely that we would be able to hedge that risk. So I'm all for social safety nets.

Right but I think that this distorts the market as those receiving the money are less likely to spend it on a new piece of technology or invest it at their old age than when they earned that money raising the question what new idea could be supported by this influx of cash at a time people are more likely to take risks?
 
Right but I think that this distorts the market as those receiving the money are less likely to spend it on a new piece of technology or invest it at their old age than when they earned that money raising the question what new idea could be supported by this influx of cash at a time people are more likely to take risks?

But those who receive the money are more likely to spend it than not, and, in addition, a pretty huge chunk of that money goes to workers administering programs who take their paychecks and buy houses and cars and invest, etc. or to people who develop property to rent to Sect 8 tenants and the like. I am not so sure the opportunity cost on a macro level wouldn't be negligible.
 
But those who receive the money are more likely to spend it than not, and, in addition, a pretty huge chunk of that money goes to workers administering programs who take their paychecks and buy houses and cars and invest, etc. or to people who develop property to rent to Sect 8 tenants and the like. I am not so sure the opportunity cost on a macro level wouldn't be negligible.

Right but that money did not grow in most cases lost value over the time it was in the system so any profit that could be made of that money is lost.
 
Right but I think that this distorts the market as those receiving the money are less likely to spend it on a new piece of technology or invest it at their old age than when they earned that money raising the question what new idea could be supported by this influx of cash at a time people are more likely to take risks?

Yes, but which is more important? A person having that money to spend on a new piece of technology? Or a person having that money to spend when they don't have a job and nobody is hiring?

This is also a bit misleading as well. That person's wealth doesn't really go away. It does get spent.

What social safety nets do is just defer when that wealth is being spent. Social safety nets allow that money to be spent during a bust cycle, typically when people are not earning any new wealth.

So the question really is which is more important - spending that money on new consumer items now during a boom cycle or spending that money on new consumer items later during a bust cycle?

I still say the latter is more important because that spending can help prime the pump of a bust cycle and get the economy back in motion again.
 
Right but that money did not grow in most cases lost value over the time it was in the system so any profit that could be made of that money is lost.

Money has to lose value over time unless the population turns south just because we have to expand the supply. Relative to income, I think a loaf of bread still costs about the same as it did in the 1920's I read somewhere.
 
Yes, but which is more important? A person having that money to spend on a new piece of technology? Or a person having that money to spend when they don't have a job and nobody is hiring?

This is also a bit misleading as well. That person's wealth doesn't really go away. It does get spent.

What social safety nets do is just defer when that wealth is being spent. Social safety nets allow that money to be spent during a bust cycle, typically when people are not earning any new wealth.

So the question really is which is more important - spending that money on new consumer items now during a boom cycle or spending that money on new consumer items later during a bust cycle?

I still say the latter is more important because that spending can help prime the pump of a bust cycle and get the economy back in motion again.

That's not the point of this discussion though as I said I'm not interested in talking about the merits of the programs that's a horse beat to death on here I want to talk about the economics.
 
That's not the point of this discussion though as I said I'm not interested in talking about the merits of the programs that's a horse beat to death on here I want to talk about the economics.

I was talking about the economics of it.

Having that money deferred by social safety nets for spending and investment during bust cycles helps reinvigorate the economy, and thus is more preferred than the opportunity costs of that money being spent during a boom cycle.
 
That's not the point of this discussion though as I said I'm not interested in talking about the merits of the programs that's a horse beat to death on here I want to talk about the economics.

In a depressed economy, several of the social safety nets actually generate more than a dollar of economic activity for each dollar you spend on them. When a family is legitimately concerned about their ability to continue feeding themselves, they lock up the spending hardcore. When large numbers of people do this because they're concerned about a recession, this just serves to make the recession worse. On the other hand, if safety nets leave them with a little breathing room, they're still comfortable buying a television or a case of beer. Give them a dollar for food, they'll spend that dollar and another 70 cents on whatever else.

Sounds to me like we should ask about the opportunity cost of not having a safety net.

And before anyone says it: No, this is not an endorsement of abuse of these programs, nor an endorsement of unlimited safety nets or communism or whatever bull**** the far-right types just thought up when they read this.
 
In a depressed economy, several of the social safety nets actually generate more than a dollar of economic activity for each dollar you spend on them. When a family is legitimately concerned about their ability to continue feeding themselves, they lock up the spending hardcore. When large numbers of people do this because they're concerned about a recession, this just serves to make the recession worse. On the other hand, if safety nets leave them with a little breathing room, they're still comfortable buying a television or a case of beer. Give them a dollar for food, they'll spend that dollar and another 70 cents on whatever else.

Sounds to me like we should ask about the opportunity cost of not having a safety net.

And before anyone says it: No, this is not an endorsement of abuse of these programs, nor an endorsement of unlimited safety nets or communism or whatever bull**** the far-right types just thought up when they read this.

But doesn't that create a market abroation of increasing recreational products instead of work related products because of mixed market segments.
 
I admire the restraint the responders have to the painful thread title.
 
But doesn't that create a market abroation of increasing recreational products instead of work related products because of mixed market segments.

No, why would it?
 
No, why would it?

Imagine there are two types of clothes being produced work an leisure if there is a increasing spending power in the population that did not earn it you will see a shift in production of leisure good when the market of Warner's would dictate a shift in the production of work cloths.
 
Imagine there are two types of clothes being produced work an leisure if there is a increasing spending power in the population that did not earn it you will see a shift in production of leisure good when the market of Warner's would dictate a shift in the production of work cloths.

Working people buy work clothes. Everybody buys leisure clothes. Safety nets do not transfer one set of demand to the other.

You're grossly oversimplifying things and it is leading you to an inaccurate conclusion.
 
What's painful about it?

Clearly there was insufficient money spent on orthography.

In any case, your analysis completely ignores the velocity of money and the multiplier effect. Which sort of moots the entirety of it.
 
Clearly there was insufficient money spent on orthography.

In any case, your analysis completely ignores the velocity of money and the multiplier effect. Which sort of moots the entirety of it.
No I simply asking isn't there a loss in multiplier from the money in its natural market state to its saftey net state?
 
I think your post is a bit misleading, though I don't think it's intentionally so.

You make it sound as if all the money spent on social safety nets in the last 70 years was what stopped the Great Recession from becoming the Second Great Depression.

But that's not the case.

Over the past 70 years, the U.S. economy has had several significant recessions and economic downturns. The money spent at those times aided the people of those times.

So social safety nets have helped people throughout the 70 years that we've had them, not just now.

Personally, I am in favor of social safety nets. Social safety nets are designed to provide aid to people and, hopefully, get them back to work.

A laissez-faire capitalist system is not. Rather, such a system is designed only to allow businesses to gain the most profit however they can no matter the consequences. And that system doesn't care how many people are unable to find work or are put into poverty because of it.

And I think that the return on investment we get by having people take advantage of social safety nets in a bust cycle outweighs the opportunity costs we suffer by not having that money in use during a boom cycle.

By having that money in reserve during a bust cycle we hedge against economic collapse. It also ensures that we have reserves to invest in entrepreneurs and workers who can use that money to re-fortify our economy.

Without social safety nets, it is unlikely that we would be able to hedge that risk. So I'm all for social safety nets.

Samsmart, I am someone in agreement and somewhat in disagreement with your post. But what I find interesting is the part I bolded. I am not sure why our government should have money in reserve, when it can print all the money that it wants whenever it needs it.

that said, I do believe that many government programs, particularly infrastructure type programs, should be ran counter cyclical to our private sector economy. And while I understand that saftey net programs may have kept us out of a full fledged depression, I personally find means tested welfare disgusting, as it tends to lock people into poverty.
 
Money has to lose value over time unless the population turns south just because we have to expand the supply. Relative to income, I think a loaf of bread still costs about the same as it did in the 1920's I read somewhere.

I suspect that a loaf of bread is far cheaper today. Regardless, money doesn't loose value just because the supply grows. Inflation is caused by too much money chasing after too few goods. Unless we are producing too few goods, or expanding the money supply faster than we are producing goods, then generally we don't have inflation.

I suspect that most of our inflation is caused by the fact that we are running short of many things that we need to produce with. Like land, land will always, over a long period of time, rise in value faster than the inflation rate. So will fossil fuels. Also, increased gov regulations tend to run up the cost of stuff, yet thats not really such a terrible thing, it's a tradeoff between health and cheap stuff. I prefer health myself. And for the past 100 years, we have purposely created some inflation by slightly overprinting money every year, because some slight inflation is better for our economy than any inflation.
 
In a depressed economy, several of the social safety nets actually generate more than a dollar of economic activity for each dollar you spend on them. When a family is legitimately concerned about their ability to continue feeding themselves, they lock up the spending hardcore. When large numbers of people do this because they're concerned about a recession, this just serves to make the recession worse. On the other hand, if safety nets leave them with a little breathing room, they're still comfortable buying a television or a case of beer. Give them a dollar for food, they'll spend that dollar and another 70 cents on whatever else.

Sounds to me like we should ask about the opportunity cost of not having a safety net.

And before anyone says it: No, this is not an endorsement of abuse of these programs, nor an endorsement of unlimited safety nets or communism or whatever bull**** the far-right types just thought up when they read this.

I suspect that anytime money is injected at the bottom (like in the hands of poor people), that the multiplier effect is much larger than in the hands of the rich. If Bill Gates got an extra buck, I seriously doubt that he would run out to spend it, thus it wouldn't increase demand, or actively circulate, and the multiplier is actually 0. But if a poor person got that dollar, he's going shopping!
 
There's nothing more frustrating than hearing the term Opportunity Cost being used with regards to taxpayer funds. The whole concept of opportunity cost relies on the purchaser being able to make his or her own decision. I don't get any opportunity to spend it on anything other than taxation.

In terms of opportunity for society, well yeah, you can sit around all day and debate how you could have spent my money better. I'd still prefer it if you'd just stop taking it from me in the first place. Then we could have a real discussion about opportunity cost.
 
I suspect that a loaf of bread is far cheaper today. Regardless, money doesn't loose value just because the supply grows. Inflation is caused by too much money chasing after too few goods. Unless we are producing too few goods, or expanding the money supply faster than we are producing goods, then generally we don't have inflation.

I suspect that most of our inflation is caused by the fact that we are running short of many things that we need to produce with. Like land, land will always, over a long period of time, rise in value faster than the inflation rate. So will fossil fuels. Also, increased gov regulations tend to run up the cost of stuff, yet thats not really such a terrible thing, it's a tradeoff between health and cheap stuff. I prefer health myself. And for the past 100 years, we have purposely created some inflation by slightly overprinting money every year, because some slight inflation is better for our economy than any inflation.


I don't think we are short of land for industry by any stretch of the imagination. Too many people probably put too much money in houses they do not need/cannot afford. I've seen that happen a lot, and I have seen what happens when they do. Americans are addicted to spending and getting their wants. It is really befuddling that people put their wants so far ahead of their needs to their detriment. Even in the welfare debate, people's sense of what people are entitled to is just sad. I was in Walmart the other day and saw that Rachel Ray has a "garbage bowl". It was $19.98. Basically just a hard plastic bowl to put your kitchen waste in. I am sure they will sell a lot of them because people are too dumbass to realize that the plastic bowl they already have or could get at the Dollar store for a couple bucks could serve the same purpose.
 
There's nothing more frustrating than hearing the term Opportunity Cost being used with regards to taxpayer funds. The whole concept of opportunity cost relies on the purchaser being able to make his or her own decision. I don't get any opportunity to spend it on anything other than taxation.

In terms of opportunity for society, well yeah, you can sit around all day and debate how you could have spent my money better. I'd still prefer it if you'd just stop taking it from me in the first place. Then we could have a real discussion about opportunity cost.
that was the whole point of this thread what profit could the taxes taken for these programs yielded if left in the market.
 
that was the whole point of this thread what profit could the taxes taken for these programs yielded if left in the market.

I didn't see anyone suggesting that the taxation not be in effect to begin with. You were simply debating how it should be divided and spent after the fact.
 
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