Pages

Tuesday, January 8, 2008

Should Fiscal Policy be Used as a Stabilization Tool?

We already know Greg Mankiw's answer to this question. We now know Alex Tabarrok's answer as well: no. His reasons--which are similar to some of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 points I raised earlier--are as follows:

"First, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 money for any new spending or tax cuts has got to come from somewhere, right? Thus cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re is usually substantial crowding out of any stimulus.

Second, by cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 time cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 new spending or tax cut gets through cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 political process cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 economy has moved on and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 stimulus is no longer relevant except by accident.

Third, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re just isn't that much discretionary spending to play with and even a large increase in spending, say tens of billions, is too small to make much of a difference in a 13 trillion dollar economy.

Fourth, in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir desperation to "do something" politicians will often do something foolish. If a spending increase or tax cut isn't worthwhile on its own merits cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n it's highly unlikely to be worthwhile once we add in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 benefits of "stimulus." Thus, it's one thing to argue for extending unemployment benefits as a matter of welfare it's quite anocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r to think that an increase in unemployment benefits will so increase spending as to reduce unemployment! (The implicit view of Larry Summers.)"

Since Greg Mankiw is crafty at naming new clubs (e.g. Pigou Club), maybe he should find a clever name for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 "no fiscal policy" club he and Alex are forming. I suspect Larry Summers will not be joining anytime soon.

Update
See this relevant post by Mark Thoma

No comments:

Post a Comment