Author Topic: Does this make economic sense  (Read 1903 times)

anisotropy

  • Pencil Stache
  • ****
  • Posts: 681
Does this make economic sense
« on: June 02, 2017, 03:26:55 PM »
Not sure if this is the right place to ask an econ questions such as this, but I hope with a bunch of analytic minds, we could have some sensible answers in this convoluted scenario and avoid double counting things.

I will be using real life numbers since it has been a real life phenomenon:

Suppose a group of people with large capitals got together in the mid 2000s and decided to start/expand a new industry. Over a period of 10+ years they invested over 4 trillion dollars (yes this is very close to the reality) into this industry; the industry as a whole grew at an exponential rate and captured the minds and hearts of the public.

It is estimated that each 1 million dollars of investment resulted in 7 workers being hired so 4 trillion dollars led to 28 million jobs worldwide cumulatively. A network of supply chains worth perhaps 100s of billion dollars had also been established during the time frame. (The investments required to establish the auxiliary businesses are unknown but likely a few trillion dollars as well)

The only problem, is that the industry (both primary and auxiliary) hasn't made money. On the rare occasion that it did, the margin is so tiny it is practically negligible compared to the original investment.

My question is, are the benefits of 28 million jobs and their multiples enough to offset the "waste" of the initial investments. Moreover, would it be better, if the investments had been made elsewhere, say, in a more established industry which would have generated 30% inflation adjusted return and created 10 million jobs (wages being 50% higher) worldwide cumulatively.

Thanks.

SwordGuy

  • Walrus Stache
  • *******
  • Posts: 6765
  • Location: Fayetteville, NC
Re: Does this make economic sense
« Reply #1 on: June 02, 2017, 09:11:43 PM »
What's the goal?

Improve employment?

Make money?

Get whatever that industry does done?



anisotropy

  • Pencil Stache
  • ****
  • Posts: 681
Re: Does this make economic sense
« Reply #2 on: June 09, 2017, 08:20:14 PM »
no goal per se, just wondering which option would have maximized the economic recovery.

ie, did the 18 million "extra" job provide more to the economy than the 5.2 trillion dollars ?

mozar

  • Magnum Stache
  • ******
  • Posts: 3216
Re: Does this make economic sense
« Reply #3 on: June 10, 2017, 11:14:23 AM »
I'll take a swing at this (so I can practice writing complex thoughts). Are you talking about amazon.com? Uber?

Quote
The only problem, is that the industry (both primary and auxiliary) hasn't made money. On the rare occasion that it did, the margin is so tiny it is practically negligible compared to the original investment.

They invested the money because they think it will make money in the future.

Quote
Moreover, would it be better, if the investments had been made elsewhere
But they didn't. This is why behavioral economics is important. It's important to study what actually happens instead of pontificating on (your personal) ideal scenario. My personal preference is that rich people invest in companies rather than hide it in offshore tax havens.

Quote
My question is, are the benefits of 28 million jobs and their multiples enough to offset the "waste" of the initial investments.
The investors don't think it's a waste. And sure 28 million jobs is better than 10m jobs, but what kind of jobs were they? Were they middle class jobs? That gets into a whole 'nother area of research of what kind of society do you want to have (most people have crappy jobs vs a strong middle class, should the governments that allowed amazon to evade taxes required that they only provide good jobs for example)