Anthony J. Evans, The Filter^, Feb 2009
A roundup of contemporary crtiicismts of Obama's $700bn spending plans
According to the Chicago Tribune:John Cochrane, a professor at the University of Chicago
Booth School of Business, says that among academics over the last 30
years, the idea of fiscal stimulus has been discredited and in graduate
courses, it is "taught only for its fallacies."
New York University
economist Thomas Sargent agrees: "The calculations that I have seen
supporting the stimulus package are back-of-the-envelope ones that
ignore what we have learned in the last 60 years of macroeconomic
research."
Greg Mankiw provides a list of more economists that are skeptical of a spending stimulus:
Mike Moffatt has some excellent posts on this topic. In "Why is so little known about modern fiscal stimulus" he cites Mark Thoma:
Monetary policy could be implemented faster, with less distortions, it could be reversed quickly, it was in the hands of independent, public minded shepherds, there wasn't any dimension, or so it was thought, upon which fiscal policy would be better than monetary policy, and vast amounts of research were devoted to getting the monetary policy component of stabilization policy correct. In the process, fiscal policy was dismissed as irrelevant, at least as a stabilization tool, and largely ignored by researchers (fiscal policy was still used to try to promote growth - that's the whole supply-side argument about cutting taxes, but not as a stabilization tool). That's not to say government spending and taxes weren't included in models and analyzed theoretically, or even empirically, but to the extent that happened, the questions were not focused on how fiscal policy could be used as a stabilization tool -- the models were not constructed to answer this question.
Also see "What are the key ingredients of fiscal stimulus" and "Fiscal stimulus - unlikely to work in the real world"
Here are some more links to take a look at:
- Political affiliations of modern macroeconomists
- Keynes as Public Works Skeptic
- A 40-Year Wish List:You won't believe what's in that stimulus bill
Update (19/2/09): Mario Rizzo tries to explain "Why Obama’s Stimulus Won’t Work and What Might" - you can view a video of his remarks here.
