Making a predetermined outcome sound like real economics

Roy Cordato makes an interesting finding in a REMI webinar. Regional Economic Modeling, Inc. (REMI) is another firm that provides

proprietrary economic models to private businesses, trade associations, government agencies and consulting firms that use them to estimate GDP growth, job creation, and other impacts associated with public policies that are usually (but not always) funded through state and local government programs.

For more information on such proprietary models and their abuses to promote government malinvestments, see Roy’s report on “Economic Impact Models: The Missing Ingredient Is Economics” and this digest of our writings on the subject.

The webinar had “economic associates” (a telling euphemism) show how you could use the software to tell two entirely different “economic stories” (an even more telling euphemism). Roy writes,

The point that they seem to make is that no matter what your storyline might be, the model can process it and give some sort of empirical projection of its impact on the economy. Of course, the impact on the economy is predetermined by the story.

Ultimately, what they demonstrate is that the model is not actually set up to provide an accurate answer based on sound economic principles but, instead, will provide whatever answer the analyst wanted from the start.

Whether jobs are created or destroyed, it’s always good for ‘economic impact’

The News & Observer today provides another example of why rent-seeking outfits resort to such “economic story”-telling. It works. It’s in an article entitled “Construction of this Eastern North Carolina rail hub wouldn’t happen without you.”

(The headline means that the State of North Carolina is forcing taxpayers to fund it. You don’t have a choice.)

This would be the CSX rail hub about which the N&O has been such a patsy for ridiculous economic-impact numbers before (which I wrote about it; see below).

Here’s what we glean from today’s story:

  • CSX is investing “$40 million” in the “Carolina Connector” project
  • The state “plans to spend $118.1 million for road improvements and to develop the 330-acre site, including buildings, rail sidings, parking and storage areas and the cranes needed to move the containers from trucks to trains and vice versa.
  • The project will employ “25-30 people”
  • It “could support another 1,300 jobs at companies that use the hub” (or, you realize, it could not)

And then there’s this:

  • “The state also says that by taking trucks off the road, the yard will generate another $300 million in other benefits over time, including reduced shipping costs, emissions, traffic congestion and damage to highways.”

Just so you’re following—

the state plans to spend money on road improvements
in order to create new jobs,
which is good and will have a positive economic impact,

and it justifies this by saying it’ll destroy jobs in trucking,
which is good and will have a positive economic impact
because it won’t have to spend money on road improvements.

Keep reading that till you realize what utter folly this is. Or click on this:

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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