All true. But you know what else would ensure a lot of that money gets spent? Giving it to Uncle Sam and sending down to the corner store to buy some of his very favorite imported road repairs, discount text books, and collector's edition jet engines. And when he's done with that, he can buy more food for people who can't afford it. Why settle for stimulating with 80% when 100% will do?

(There may be a good answer for that, but I'm curious.)

We could call it:
"A well-paying, secure job with excellent benefits"

... although people might see through that one.

when suze orman was asked the other night about what people should do with any moneys received from this stimulus...she said, "do not go and spend it. forget stimulating the economy...you better put in the bank and save it for when you need it in a few months, down the road, for bills or emergencies."

well said.

The way we frame economic questions matters massively to how individuals answer them.

Which mostly proves that Americans in general are horrible at math.

Xbox Encouragement Program? I love my Xbox, but is it going to sufficiently stimulate the economy if we all just give our bonuses to Microsoft?

I'd go with the MacBook Air Cost Premium Offset Program.

"The way we frame economic questions matters massively to how individuals answer them.

Which mostly proves that Americans in general are horrible at math."

No, it proves economists who don't acknowledge the partially irrational nature of people are horrible at understanding them.

The biggest reason why we won't ever see a change in this terminology is that to many conservatives it's far less important to "stimulate the economy" than it is to cultivate the belief that taxation is bad, confiscatory, and burdensome, and to reenforce the illusion that Supply Side economics works. Calling the stimulus package a rebate says "we took your money, but we didnt' need all of it so we're giving some of it back because it's your money and because we think you will spend it better than we will." It also sets up an ability to say "see, even the Democrats agree that refunding peoples taxes is good for the economy, so wouldn't it be even better to just reduce taxes to begin with?" When the Democrats and the Republicans "compromise" on a plan like this they can do it in part because they believe they're doing very different things and that the mechanics of how and why the plan will work are very different.

Which mostly proves that Americans in general are horrible at math.

I don't think that's really the explanation. It has mostly to do with whether or not something is perceived as a gain or as a loss.

So take the virus hypo. You have two groups of subjects. Both are presented with the same scenario: there is a deadly virus that will kill 600 people if we do nothing. One group of subjects is presented with two programs for handling this health crisis, and asked to choose which is preferable.

A: will save 200 lives, for certain.

B: has a 1/3 probability of saving 600 lives, but a 2/3 probability of saving 0 lives.

As you can see, the choices are from the rational economic actor standpoint equivalent, so there's no obvious choice. But the majority of people pick option A, preferring the certainty of saving 200 over the all-or-nothing approach of B.

The other group is presented with the same scenario, and asked to choose between these two programs:

C: 400 people will die, for certain

D: has a 1/3 probability that no one will die, and a 2/3 probability that 600 will die.

Within this group, the majority of people prefer option D, even though the choices are not substantively different than those presented to the other group.

So it's not that they don't understand math; it's that people tend to be risk averse when dealing with what they perceive as gains (preferring to save 200 for sure rather than taking a risk to save 600) but risk seeking when they perceive all options as losses (preferring to take a chance on preventing 600 deaths over the certainty of 400 deaths).

This effect also shows up in, e.g., lawsuits. Plaintiffs, even when only seeking to be 'made whole,' see potential settlements or judgments as gains, whereas defendants see them as losses. This makes plaintiffs more likely to adopt risk-averse tactics (e.g. settling for $400K even though they had a 50% of getting $1M at trial), while defendants do they exact opposite (choosing to roll the dice on a trial instead of settling).

Learn from Katrina. Give out cash cards.

I'd be curious to see how the effect varies based on the size of the rebate/bonus and how it varies based on the relationship between the size of the rebate/bonus and the size of a person's income.

At least one economist says that "rebate" is the wrong term for another reason: a rebate is getting back part of an amount that you paid, and some of the people getting the payments didn't pay any income taxes.

http://www.andersoneconomicgroup.com/modules.php?name=Content&pa=display_aeg&doc_ID=2271

No, no, no! Remember, we want to encourage domestic spending, and the XBox is imported. Best done with food purchases/splurges.

The Go-Out-to-Eat Bonus program?

I can buy into the basic validity of Prof Epley's point, but boy, for someone so into framing he sure can't write worth a crap.

To wit:

People are more willing to treat 600 people infected with a deadly virus when they are told the treatment will save 200 of those lives, than when they are told that it will kill 400 of them

Well, I'm sorry, but those 2 things are not equivalent. If the treatment will kill 400, that's not the same thing as saving 200 and having no effect on (i.e., failing to save) the other 400. The "will kill 400" implies that the treatment is itself the cause of death.

Also,

An investment banker who is delighted by saving $5 on a pair of shoes but disgusted by receiving $1,000 for a year-end bonus has experienced the power of framing effects.

That's not a framing effect, it's a comparison vs. expectations. I.e., he paid $5 less than he expected to for the shoes; and he got significantly less in bonus than he expected (or thought he deserved). Framing has nothing to do with it.

Glenn, this is an empirical observation of how people actually reason. (Read Kahneman and Tversky for more on that.) It isn't enough to flail ones arms and say they should become vulcans.

The way we frame economic questions matters massively to how individuals answer them.

I suppose, for some individuals. Call it a bonus, rebate, or free money and I'm still putting in an interest bearing account set aside for a trip to Europe in the next 3 years.

That last anonymous was me. Seriously, does the "remember personal info" checkbox work for anyone else who uses FireFox? It never fills in the fields and its the most annoying thing about Ezra moving to the prospect.

The whole commenting system is all f'ed up. I think someone is working on it.