Marginal Utility

by Tom Bozzo

It's an occupational hazard, sure, but my first reaction to the revelation of massive screw-ups in the Greater Madison Chamber of Commerce's study purporting to demonstrate enormous costs associated with the paid sick leave ordinance proposed for the city was irritation that the Chamber and the study authors were giving "hired gun economists" a bad name.

I don't begrudge the Chamber having a position it wants to advocate. It's not even totally indefensible in principle, as mandating something that's (other things equal) a pay increase for some workers will have a variety of costs that theoretically could exceed the benefits. The hackwork is what I can't abide.

Unfortunately, the world is flush with hackwork, as Chris Mooney describes in The Republican War On Science, the current reading material of the not quite forgotten (*) Marginal Utility "Book Club" (**). Much of Mooney's early emphasis, discussing the Republican reaction to the science behind global warming, is on the improper exploitation of scientific uncertainty — litigation strategy 101 when the weight of the evidence is against you but you don't want to go along with it.

Since economics is unusually blessed with analytical uncertainty, the smokescreen option is almost always available. From a quick look at the executive summary of the report (thanks, Brenda Konkel, for providing a copy), the Chamber opted for pure hatchet-job. On the plus side, those are relatively easy to spot, versus controversies of the "two PhD's disagreeing with each other about bias and variance" sort.

Since there are significant elements (even in Madison!) primed to believe that any regulatory intervention in the "free" market will lead to floods and pestilence — see Susan Lampert Smith in today's State Journal for an uncharacteristically canny take — it may not have struck anyone that the headline results failed the laugh test.

Now off to read the study... Meanwhile, interested parties should read Max Sawicky at TPMCafe on the Maryland health insurance law as a placeholder.

...early howler, a "profitability" bullet on the executive summary page describes a "typical" retail business making a profit of $0.20 per $100 in sales shifting to a loss of $0.56 per $100 due to the sick leave mandate. Do they expect me to believe that a typical retail business has a net margin of 0.2%?? By advanced math, that's $2,000 profit on $1,000,000 in sales. Last time I checked, many proprietors of small businesses could actually eat and keep roofs over their heads. Another decimal place error, I suppose.

(A follow-up post is here.)


(*) Brayden, I'm really going to post something on Accelerando someday!

(**) As literature, it's a little too bloggy, perhaps. It arguably would be better presented as a hypertext that could use intratextual hyperlinks to avoid much use of "aforementioned," or otherwise Mooney's editor should have had more faith in book readers' ability to remember details over the span of pages or even chapters!