stimulus spending
Jake Lodwick asks:
What is one thing the government could do — one mistake they could make — that would convince you they cannot ‘fix the economy’ by spending more money and creating new rules?
In other words, is your belief falsifiable?
But let’s turn this around. Are there any signs that would make you think that serious government intervention is necessary? There is a certain ideological purity in sticking with the non-intervention plan, even if it kills the economy. But for those who don’t want to go down on with the ship, what would convince you that, maybe, the government could order some repairs? Is your belief in the infallibility of the market falsifiable?
The historical experience with stimulus spending is decidedly clear: By the time the government is finally in a postion to begin pumping money into economy, the economic crisis has largely passed. The sheer amount of legislative and bureuacratic obstacles that must be overcome in order to approve, allocate and actually begin spending stimulus dollars is such that the government generally arrives at the party a little too late. Thus, the government has a role to play in assisting with recovery efforts, but the initial taming of the crisis is primarily achieved through market forces alone.
It is instructive to look at the New Deal. Economists remain divided over whether or not Roosevelt’s stimulus efforts actually improved economic conditions, or if they made them worse. And guess what: the position that most economists take in this debate is directly related to their ideological agendas. There is very little science involved when it comes to judging the relative merits and/or shortcomings of stimulus spending, which is entirely unsurprising given the complexity of the market, and the number of dynamic variables and external factors that are involved.
I propose that we recognize the ideological beliefs that inevitably inform every economic argument, while at the same time doing away with the flismy notion that economics is an objective science. The economy is a social phenomenon (remember?), and it is time for us to return to treating it as such.
