Comment 70038

By Freedom Seeker (anonymous) | Posted September 24, 2011 at 10:17:43

There are a few problems with the authors post, and also, surprisingly, it seems with Dr. Kubursi's report which need to be considered when trying to figure out what the impact on the economy as a whole would be if social assistance rates were to be increased.

I am not prepared to argue the magnitude of benefits quantified in the report, but this is only half the story. The money to pay those benefits was taken from taxpayers and we need to ask what would have happened if they had not been taxed for this purpose.

We can assume that just like the OW/ODSP recipient they would have spent that money, and in the process generated jobs in retail stores, paid a portion in taxes, etc., all the sorts of things that the OW/ODSP recipient would have done that are named in the report. So, if we are to calculate the net stimulative effect on the economy (if any) from an increase in OW/ODSP we need to consider both the activity made possible by transferring the money to the recipient, and the activity made impossible by virtue of the fact that the taxpayer no longer has the money.

This sort of incorrect one sided analysis shows up all the time in popular discourse, and in general is known as the "broken window fallacy" by economists (Google for more detail). If I have misread Dr. Kubursi's report and falsely accused him of making this error then let me apologize here and now, because it's really inexcusable for a professional economist to make such an error.

All this is not to say that I object to the idea of raising assistance rates, just to outline what needs to be done to predict one aspect of the overall impact of such an increase.

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