by Russ Roberts on January 20, 2009

in Stimulus

When I suggest that the $825 billion pork package might not stimulate the economy, the next question is always the same: so what would you do to stimulate the economy?

But maybe, just maybe, there is nothing the government can do in the short run to help the economy improve. What if it's like a cold? There are pretend cures and cures that look like curse because of spurious correlation. But what if there's nothing the government can do other than avoid mistakes?

This answer that we are impotent in the face of all the lousy decisions that have already been made and that the price simply must be paid and there is no avoiding a serious recession after we messed up the housing market and destroyed the financial system and then tried to nationalize it without really nationalizing it is simply unacceptable in the face of our hubris as economists and policy makers. But what if it's true? What if the best policy really is to do nothing and wait it out? What if the attempts to shorten the pain make it last longer?

Inconceivable, isn't it?


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