Let’s cut to the chase today.   

Krugman’s Cost Benefit Analysis for Austerity Cuts in Government Spending.  

How’s that for a title?    Attention grabbing.  But  for a real show stopper,  here is a way to find a simple austerity cut in the midst of a sudden increase in government expenditure.    

• Let the change in spending be , the tax rate be , and the multiplier rate be , then the change in revenue, , is given by the equation: .   

then 

•  As a result of this spending, the overall cost or savings, , can be obtained from the changes in spending and revenue according to the equation: .

furthermore 

•  let the real interest rate be . Then the resultant change in interest payments, , can also be determined from the costs and the interest rate: .

Finally,

• we can use this last calculation and the tax rate  to calculate the change in GDP, ΔGDP, required to either nullify the proposed fiscal savings in the case of a spending reduction or nullify the possible fiscal costs in the case of a spending increase: 

The great thing is these four equations are used to calculate the revenue increase/reduction, , the cost or savings, , the change in interest payments, , and the change in GDP, , sufficient to eradicate the fiscal effects of the original cut or increase in government spending, .

All results are given as a percentage of the GDP. These five macroeconomic effects are then displayed as a bar chart with negative values labeled to the right in red and positive changes labeled in blue.

eg 

 

 

 

 

 

 

 

 

 

 

 

These gems are provided by Wolfram’s online web studio which is just fantastic.  Having used it while laid up recently,  now the real system will be explained.   Unlike smoke and mirrors software developers,  Wolfram has real people across the world using his software without resorting to bombastic marketing quacks with their lying ways,  all threatening and mysterious.  No.   Wolfram sends real programmers to show you,  for free, how to use his software.  Which he’s spent decades building and perfecting with folks across the globe.  So I look forward to Wits University and his training session on Friday 3rd September.   I’ll take a camera and Business Day users will have a grand entrance into this beautiful world of nested rules,  and pattern-based secrets.  

Ok that’s pretty deep.  But you can also do this 

The potter will be pleased

 

 

And run clever word tricks with the same software.    Something like the Encylopaedia Brittanica combined with CAD.    If you don’t believe it just go search the net like you should and you’ll find all of these great apps lying about, waiting to be explored like uknown distant civilizations in a bright galaxy nearby.  

 

 

 

And why all this hard sell?  After all these nights of toiling away putting a few nested rules into a line, and hiding from the non-striking nurse with her gauge 18 smile,  I get to learn directly from the folks who brought you Krugman’s secret answer to Pravin’s terrible conundrum.   Bring it on.

Tags: #austerity cuts, #fiscal, #GDP, #government spending, #krugman, #nested rules, #savings, #software, #wolfram