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Can Larry Summers talk me into the stimulus package?
Here is his non-excerptable attempt, via Brad DeLong. Still I am not convinced. Using the Law of the Excluded Middle, yes you can get me to agree that the stimulus package is unlikely to do direct economic harm. I still see the stimulus plan in terms of larger symbolic battles. We pass too many policies just to show politicians are "doing something," just because it is an election year, just because voters think government should solve every problem, and just because politicians know that voters don't understand any real economics. This fits all those categories. On the substance, I would add that for the U.S. "not going bankrupt" is a matter of degree. Compared to Brad or Arnold Kling, I'm still a fiscal optimist. But I've spent too much time reading papers on the intransitivity of indifference relations: "Just another grain of sugar in your coffee, dear. It won't change the taste even a tiny bit..."
Posted by Tyler Cowen on February 5, 2008 at 02:06 PM in Economics | Permalink
Comments
Do you think most politicians understand economics?
Posted by: Yancey Ward at Feb 5, 2008 2:10:33 PM
Yancey Ward's comment was my first thought as well. The way the post is written implies that politician understand economics better than voters and exploit that ignorance for getting votes. This is one version of the Bryan Caplan model.
I would argue that a second acceptable model would be that most politicians do not understand economics any better than the voters. Hence the popularity of statements like "cutting taxes raises revenue" or "the giant sucking sound" of NAFTA, or even just, "its the economy, stupid."
Maybe I am not cynical enough?
Posted by: Brad Holden at Feb 5, 2008 2:45:17 PM
Brad,
It often seems impossible to be too cynical. I certainly push the limit if there is one.
Posted by: Yancey Ward at Feb 5, 2008 3:11:04 PM
The reason for a stimulus package is the same reason the US had air wardens in the heartland during WW2. If you don't understand the reason for this or at least feel it in your heart then you can't be a political leader.
Posted by: huggy at Feb 5, 2008 3:26:26 PM
I fail to understand how we know that those purchasing US debt securities to fund the transfer would have been any less likely to provide demand stimulus compared to the recipients. Given that those advocating the transfer payments also suggest the US consumer is 'strapped' and 'hurting', isn’t it more likely that the recipients will 'save' the money they receive. In this case are we not worsening the impact of some credit based shock?
Posted by: Parker at Feb 5, 2008 3:26:48 PM
Gripe about the imaginary effects of the stimulus package all you want, but if you agree -- as you must -- that a world 80 years from now with 5 billion people is preferable to one with 5 people, then wholehearted support for the stimulus package follows.
Posted by: Kieran at Feb 5, 2008 4:24:17 PM
wait, what?
Posted by: at Feb 5, 2008 5:16:08 PM
As legislation goes, something not likely to do serious harm is better than average, and passing it takes up time that might otherwise have been devoted to worse projects. Sigh.
Posted by: Alan Gunn at Feb 5, 2008 5:47:36 PM
It seems like the argument for "intransitivity of indifference" is based on the idea of rational ignorance. The preferences are not actually intransitive, but the individual is too ignorant to observe the actual (miniscule) difference (and rationally so since doing so would come only at a great cost). Is this correct?
Posted by: William Luther at Feb 5, 2008 5:51:55 PM
Or maybe you agree with Ken Fisher and believe the government can borrow at a lower rate than individuals and businesses, and that the American people will end up earning more than 4%.
Posted by: 8 at Feb 5, 2008 5:56:15 PM
The "intransitivity of indifference relations" has been extensively studied in philosophy under the name "the paradox of the heap" (N grains of sand are not a heap, and adding a grain to something that is not a heap does not produce a heap. By induction, therefore,we can add any number of grains and never get a heap.) One analysis I recall was to say that induction cannot be used with vague predicates like "heap" (and then you get to work on some funky logics that can be used with such predicates.)
Posted by: JimB at Feb 6, 2008 1:04:30 PM
Kieran,
I'm with the anonymous guy. What?
Posted by: Bernard Guerrero at Feb 6, 2008 4:41:05 PM
"Gripe about the imaginary effects of the stimulus package all you want, but if you agree -- as you must -- that a world 80 years from now with 5 billion people is preferable to one with 5 people, then wholehearted support for the stimulus package follows."
And when I can take the pebble from your hand, I'll be ready to leave the monastery.
Posted by: Keith at Feb 6, 2008 11:58:21 PM
Man, do you people even read this blog? (Search for "carp.")
Posted by: Kieran at Feb 7, 2008 12:36:10 AM
Posted by: 深圳翻译公司 at Feb 23, 2008 10:10:46 AM
