The Unbroken Window

Orthodox Keynesians argue that in times when aggregate demand is slack, it makes no difference whether you employ people to dig holes and fill them back up or whether you actually pay people to produce public goods that are valuable. Suppose we accept this proposition – that it doesn’t matter just so long as the [...]

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From Arnold Kling:
So, when you overbuild houses in Nevada or condos in Florida, you cannot lure very many people with lower prices. Most unoccupied houses have close to zero marginal value to the vast majority of consumers, just as most unemployed workers have zero marginal product to the vast majority of firms.
He was responding to [...]

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I am sure they’ll say it was just one small incident:
We know so far that the stimulus signs cost from a few hundred dollars to as much as $10,000, which was the cost for the giant billboard that adorns renovations underway at Washington Dulles airport. The Washington Metropolitan Airports Authority confirms that the $10,000 was [...]

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The new site from CGR is Govistics, highly recommended. Here’s a tidbit:
New York State spends $11,524 per capita – in a state where median HH income is $56,000. That’s just the state. Add to that another $10,000 of spending by the federal government and you see that for a typical New York household, state and [...]

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Warren Meyer has a couple of posts showing how government involvement in the auto market and housing market only served to push forward planned purchases of these assets, with no change at all in the trajectory of consumption. Here is one of his charts:

The point I’d like to make is that supporters of stimulus and [...]

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Keynesian fiscal policy calls for stimulative government spending programs when private consumption sags and calls for a reduction of government spending when private economic activity is heating up. The joke on the people who are skeptical of government, but who are economic utilitarians nonetheless is that the latter rarely happens. For example, I’d get on [...]

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In a recent paper, Barro et al find that the probability of a country suffering a “consumption disaster” is about 1.7% per year. That sounds like an awfully scary number to me. For example, that means that over the course of a decade, there is about a 15% chance of having a disaster, and over [...]

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Government spending reduces private sector spending via another mechanism.
This paper employs a new empirical approach for identifying the impact of government spending on the private sector. Our key innovation is to use changes in congressional committee chairmanship as a source of exogenous variation in state-level federal expenditures. In doing so, we show that fiscal spending [...]

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Kill $900 billion of private sector output to get an additional $600 billion of public spending through. All good spending too, I bet. Here is the piece.
By the way, Barro was a longtime (long ago) faculty member here at the U of R.
I’d love to see someone else’s model of this spending.

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From peak to trough during this recession, the US economy lost about 3.8% of GDP – or roughly $560 billion in real output. This is generally considered a “national emergency” by economists like Brad DeLong. The economy has since gained a little of that loss back.
To put this in perspective, consider that federal government tax [...]

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