January 28, 2009
Three Stimulus Fallacies
From John Cochrane, economist at the University of Chicago, courtesy of Don Luskin. It's hard to argue with any of them. For a taste, here's number two:
Second, investment is "spending" every bit as much as consumption. Fiscal stimulus advocates want money spent on consumption, not saved. They evaluate past stimulus programs by whether people who got stimulus money spent it on consumption goods rather save it. But the economy overall does not care if you buy a car, or if you lend money to a company that buys a forklift.
Posted by John Kranz at January 28, 2009 11:01 AM
These three are classic Bastiat.
The first, "broken windows."
The second, that in the end it's only total economic production that matters, not the balance betweeen saving and spending. "To save is to spend."
The third, the promise of future returns. Bastiat wrote about French involvement in Algeria much like he would write today about government's intended "investments in the future":
We are told that the money is an advance and that, a few centuries from now, we shall recover it a hundredfold. But who says so? The very Quartermaster General's Department that swindles us out of our money. Listen here, gentlemen, when it comes to cash, there is but one useful piece of advice: let each man watch his purse... and those to whom he entrusts the purse-strings.
These three are classic Bastiat.
The first, "broken windows."
The second, that in the end it's only total economic production that matters, not the balance betweeen saving and spending. "To save is to spend."
The third, the promise of future returns. Bastiat wrote about French involvement in Algeria much like he would write today about government's intended "investments in the future":
Posted by: Perry Eidelbus at January 28, 2009 11:43 AM | What do you think? [1]