How to save 40% on benefits

13/09/2012 § 9 Comments

The latest estimate of benefits costs has come out of MSD. The report is an actuarial estimate of the present value of future payments to beneficiaries. The headline number is $78 billion.

I can save MSD 40% of those costs. I won’t even charge them for the advice — nope, this is a public service. Here is a chart of the results:

MSD’s costs are the total area shown. The costs of my plan are shown in green. The savings to MSD are in blue.


Here is my proposal:

Use Treasury’s standard discount rate.

Yeah, simple, I know, but sometimes the simplest ideas are the best.

See, MSD and Treasury got together and gave the consultants who wrote the report an extra-special, one-time-only set of discount rates. A colleague alerted me to this — I’ll let the person claim credit in the comments. There it is, Table 5.3 (notice the use of the technique, hiding it in plain sight). I’ll put the rates below, alongside the standard Treasury rates that most of us have to use when evaluating research spending, social spending, roads, dams, etc.

Year Special Standard
2012 -0.31 8.00
2013 0.65 8.00
2014 1.11 8.00
2015 1.51 8.00
2016 1.84 8.00
2017 2.12 8.00
2018 2.34 8.00
2019 2.53 8.00
2020 2.67 8.00
2021 2.78 8.00
2022 2.87 8.00
2023 2.94 8.00
2024 3.01 8.00
2025 3.06 8.00
2026 3.09 8.00
2027 3.13 8.00
2028 3.15 8.00
2029 3.17 8.00
2030 3.19 8.00
2031 3.20 8.00

Simple, yet effective.

You’re welcome.



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§ 9 Responses to How to save 40% on benefits

  • Chris Parker says:

    Nice one Bill!

    That was fun, let’s keep going!

    90% of these “costs” are transfer payments, which don’t count in cost-benefit appraisals.

    So of the remaining 10% resource costs we can strip out 40% of those costs (via the discount rate initiative), leaving a grand total of about $5b (or 6% of $78b)!

    The economists are coming to save the day.

  • Andrew says:

    Clearly Lacan was talking about your hand here then Bill? In his seminar on Poe’s purloined letter:

    “It is the imbecility of the realist who does not pause to observe that nothing, however deep in the bowels of the world a hand may shove it, will ever be hidden there, since another hand can retrieve it, and that what is hidden is never but what is not in its place… For it can literally be said that something is not in its place only of what can change places – that is of the symbolic. For the real, whatever upheaval we subject it to, is always and every case in its place; it carries its place stuck to the
    sole of its shoe”

    The question remains – what is the Reality stuck on Paula’s shoe?

    • Bill says:

      This hiding in plain sight is really interesting — I was think about Poe, too. I should re-read that seminar.

      The Reality stuck to Paula’s shoe? MSD is working very hard to re-symbolise ‘beneficiaries’, to shift their place in the symbolic order of society. If their placement flowed logically from a Master Signifier, they would not have to work so hard. So, that suggests an incoherence (a gap) that they are trying to paper over. What is it?

      • Andrew says:

        Well the Imaginary is I think pretty obvious – that being Bennett’s (personal?) belief that there is a need to ‘out’ beneficiaries as cost blights full stop. The Symbolic is, as you say, where they are attempting to do the work, but the Master Signifier is lacking (no pun intended :-)) and instead they are focusing on the generation of ‘knowledge’ as in the discourse of the university (S2). Perhaps they are informed by those kind souls who do see the beneficiary as Bennett does, for them the Master Signifier carries, for the rest of us however we also see them as consumers, parents, carers, volunteers, in education etc… their value is more complex obviously, so for the rest of us (the majority hopefully) the Master Signifier just doesn’t carry. This is the gap they are trying to paper over, this is the incoherence! The Reality stuck to Paula’s shoe is the Reality that beneficiaries are necessary in society, someone has to do their work.

  • Fiddling with discount rates is one of the first things I warn students in my Current Policy Issues class to watch out for. Egads.

    • Bill says:

      Now you have a(nother) real-life example for them. You can show them that university education does help in the real world.

  • WH says:

    I propose a new NZAE award for most messed up CBA of the year. Prize awarded on weighted average of methodological error (to standard CBA, use Tsy as base), size of costs/benefit error (40% on $78B has to be this years leading contender), and policy/public noise/effect (Eric might be able to claim advantage here over alcohol reform).

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