One of the great things about blogs written by professional journalists is
that they often contain a lot more information than gets printed. Newspaper
columns, by their very nature, have to be a certain length and accessible to
a wide audience. Blog entries, on the other hand, can provide lots of extra
information which didn’t make it into the paper. Daniel Radosh
regularly regales us with things which got cut from articles of his in print;
when Dan Drezner wrote his Foreign
Affairs piece on outsourcing, he blogged
all his sources.
Virginia Postrel is completely different. She has a column in the New York
Times, and generally gives us much more information there than she does into
her blog entries, which she uses basically for expressing opinions.
Recently, Postrel has devoted both her NYT column and many blog posts to the
subject of federal highway funding. We first heard about it in this
post, entitled "Gullible Reporter Alert", in which she excoriated
the AP’s Jim Abrams for printing nothing more than "propaganda" on
the subject of road-building. The article
was certainly one-sided, and seemed to accept as an article of faith that spending
more money on US motorways is a Very Good Thing. But Postrel didn’t really fisk
it: she just complained that Abrams didn’t provide any sourcing for the claim
that 47,500 jobs are created for every $1 billion invested in federal highway
and transit programs. Then, she told us to wait for her own article on the subject,
forthcoming in the New York Times.
Right on schedule, the
article arrived. It was headlined "Does Highway Spending Really Pay
Off?" and it asked how much economic benefit the US actually receives from
this expenditure. Based on an article in The Journal of Urban Economics, Postrel
claimed that the rate of return on infrastructure investment has fallen from
15% in the 1970s to less than 5% today.
It’s a good argument, and a good column: it provides ammunition for fiscal
hawks on both sides of the political spectrum who hate to see government spending
spiralling out of control even as the Bush administration continues to push
further tax cuts.
It doesn’t, however, say anything at all about jobs.
But Postrel was on a roll at this point, and soon published an email she received
from a reader, bringing up that jobs number once again. The anonymous correspondent
cited an even more anonymous "expert" at the Congressional Research
Office, saying that "the figure was basically a garbage number that was
cooked up for a DOT study in the mid-90s".
Then, yesterday, Postrel got an email from Arthur Jacoby, the alleged number-cooker.
She blogged it,
she said, "in the interests of fairness": not, one notes, in the interests
of actually getting to the bottom of the jobs question. Jacoby attached a Word
document which is precisely the source for the 47,500 jobs figure Postrel
was complaining that Abrams didn’t provide. It makes for interesting reading,
and breaks the jobs down quite explicitly: in the first round, 12,453 jobs are
created in the highway construction sector, along with 7,132 jobs in equipment
and materials supplying industries. Then, in the second round, 6,939 jobs are
created "because of the additional demand for inputs needed to expand output
in industries that supply highway construction materials". Finally, in
the third round, 21,052 jobs are created, reflecting "producer’s
response to an increase in consumer demand for all types of goods and services".
Of the 47,576 total jobs created, then, a good 44% are connected to highway
construction only in the most peripheral way. And, of course, all of these figure
come from a computer program – something called the JOBMOD income and
employment estimation model – which, like all economic models, will have
internal weaknesses and may or may not reflect what actually happens in the
real world particularly well.
But Postrel’s response to Jacoby’s email is fascinating: she doesn’t really
respond to anything he says at all. Rather, she snarks that "taxpayers
paid experts to come up with the calculation" – er, yes, Virginia,
would you rather that they hadn’t? and continues with this gem:
But it still doesn’t pass the smell test. Federal construction jobs pay more
than $20,000 each, and this isn’t the Great Depression; most people hired
would be doing something else if they weren’t building government roads.
$20,000, for those of you who are a bit weak on mathematics, is $1 billion
divided by 50,000 jobs, and it’s an utterly disingenuous figure. The fact that
Postrel printed it at all makes me doubt everything else she writes: it’s pure
rhetoric, with a "la la la I can’t hear you" relationship to the facts
that Jacoby provided.
For one thing, Jacoby makes it clear that the $1 billion is not really $1 billion
at all: by the time that state matching funds are added in, total government
expenditures are $1.25 billion. Then, the number of jobs created directly when
that $1.25 billion is spent on building roads is not 50,000, it’s 19,585. So
if you’re going to do any division here, try dividing $1.25 billion by 19,585:
the result is about $64,000. Which is much closer to how much jobs cost these
days, and which does "pass the smell test".
Moreover, Jacoby is surely right to include more than just the first-tier jobs
in his calculations. After all, if I’m spending billions of dollars on equipment
and materials, it stands to reason that demand – and jobs – will
be created in the industries which supply those materials. The third-tier jobs,
which are far more trickle-down, we might argue about, but (a) Postrel doesn’t;
and (b) they’re surely non-zero, in any case.
Postrel, however, doesn’t buy any of this. Rather, her "most people hired
would otherwise be doing something else" argument seems to imply that there
can never be any job creation in an economy with a relatively low unemployment
rate. If I’m hired by a construction company because they got a government contract
to build a road, has my job been created? Not if you’re Virginia Postrel, it
hasn’t: if I’d otherwise be flipping burgers or designing software, then my
job laying tarmac somehow doesn’t count.
What’s more, there seems to be an implication in Postrel’s argument that every
job created building roads means one less burger flipper or software developer
elsewhere in the economy. Let’s say that I stop flipping burgers and start laying
tarmac when the government contract hits town. OK, if you’re just looking at
me, I had one job before and I have one job now, so employment hasn’t gone up.
But when McBurgers hires my kid sister to replace me – and it surely will,
given the $1 billion boost my local economy has just received – total
employment has, in fact, gone up.
Postrel doesn’t stop there, however. Check out her very next sentence:
Keep in mind that these job projections are not based on the assumption
that highway spending is investment that increases productivity. (Her emphasis.)
This is just hilarious. The implication, to those people who haven’t been following
the story on her blog over the past couple of weeks, is that the "highway
spending increases productivity" argument is better than the "highway
spending creates jobs" argument. She neglects to mention, of course, that
she’s just written an article in the New York Times comprehensively destroying
the "highway spending increases productivity" argument, while she
hasn’t, up until this point, addressed the quite obvious "highway spending
creates jobs" argument at all.
So how does she do it? Any ten-year-old can see that if the government comes
into town and gives thousands of people jobs building roads, then, well, jobs
are being created. Only an economist could possibly disagree:
They assume that the spending is jacking up employment directly through the
hiring of construction workers and indirectly through their spending. That
Keynesian story only works if you assume lots of slack in the system.
It certainly looks here that Postrel is characterising "jacking up employment
directly through the hiring of construction workers" as a "Keynesian
story". Of course, it isn’t at all. If I open one of Postrel’s beloved
nail salons, and hire half a dozen manicurists, then I have a feeling she would
agree I’ve just created six jobs. She wouldn’t tell me that those jobs are a
Keynesian story which only exist if there’s some mysteriously-defined "slack
in the system" (I think she means unemployment, but it’s far from clear).
When the government hires people, on the other hand, or gives money to construction
companies who hire people, then suddenly the spending is "Keynsian"
and therefore suspect. Yes, it’s possible to argue about how much of a stimulus
general government expenditure really gives to an economy and to the employment
numbers. But you can’t simply say that government spending never creates jobs
in both the public and private sectors: just look at the economy of the Washington
DC conurbation, where Postrel lives.
At this point, I feel I ought to say that, as an opponent of government pork
in general, I think that Postrel is right about the highways bill. What’s more,
I particularly dislike federal roads spending, because it hides the real cost
of America’s car culture and does enormous damage to the environment. I daresay
that spending $1 billion on the arts, say, would create even more jobs, with
much less collateral damage.
Do I think that the government should increase employment? Yes. Do I think
the government should do that directly, by spending money on programmes which
are labour-intensive? No. But does spending money on labour-intensive projects
create jobs? Of course. To think otherwise is to be blinded by idealism.
PS Virginia, if you’re reading this, can you please date your individual blog
entries? They’re timestamped on the main blog page, but not on the permalinks.
UPDATE: Postrel has responded
to this, and I’ve responded right back.