I’m just taking a browse through the site and I’m pretty pleased so far.
The first thing that caught my eye was a follow-up post referencing an earlier analysis of the statistical merits of steals as a measure of a player’s value. Yeah. Long title.
I also enjoyed an analysis on the development process behind Paul Ryan’s proposed budget, including a potential error he might have made. Ryan used something called “dynamic scoring.” The term is unfamiliar to me, but from reading between the lines, it seems to be involve including “the second-order fiscal effects” of whatever happens in the budget. Author Andrew Flowers (@andrewflowers) noted this as unusual, which surprised me.
Say, for example, a government invested $3 billion in preventative health care. $1 billion was invested towards measures with a 1-year expected return (although I can’t think of any health measures with a 1-year return), $1 billion towards measures with an expected 5-year return and $1 billion towards measures with an expected 20-year return. Initially, costs would be $3 billion higher. At the end of the first year, costs would be ($3 billion – 1st year of expected return on $1 billion investment) higher. The reduction in costs would continue to compound, increasing in rate as the 5-year returns kicked in and so on.
Now, the rate of return is just an expectation. Perhaps some of the measures weren’t carried out efficiently. But, unless the predictions on the efficacy of a certain health measure were entirely inaccurate, SOMETHING would have taken place. So, it would be sensible to use a conservative estimate of those compounding impacts, but it would also be sensible to include it – which is what Ryan’s budget does.
From my understanding, this is what Flowers is commenting on as unusual. I would be happy if anyone could read the article and clear that up for me. For that matter, any comments here would be welcome. I’m sure there are some formulas that could have summarized that process much simpler than my written explanation. ha!
Flowers goes on to note that the Congressional Budget Office (CBO) makes similar compounding predictions, but only on the effects of overall deficit reduction on Gross National Product (increasing it). Ryan, meanwhile, assumes his deficit reduction invokes economic growth, increasing tax revenue, further reducing the deficit.
Flowers does make an insightful critique: if Ryan is proposing cuts to the Department of Education, that will likely have an impact on future economic growth, versus cuts to other departments. This might offset his predictions of future growth causing tax revenue increases.
At the end of the day, I am left confused by Flowers’ distinction between the CBO predictions and Ryan’s. Ryan’s uses specific policies, yes, which will have specific (yet-to-be-determined) implications. But the CBO’s guess – are they just predicting what will happen if deficit abruptly decreases without a change in specific policies? That seems like a relatively toothless prediction.
I should also add: I don’t support a MORE DEFENSE, LESS SPENDING, NO TAXES budget. I just thought that Ryan’s use of dynamic scoring seemed sensible in the context of a federal budget.
Interesting post from commenter Trey Castles:”It would be nice to see congress posit a sophisticated budget with spending increases for a higher than expected growth year and spending concessions for lower than expected growth years.”
Anyhow – the comments section has a whole series of references that I don’t understand, but hopefully an understanding of what I don’t know is one of the things I’ll gain from the website!