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I remember Krugman writing that a $1.5 billion stimulus was needed, but is a stimulus of that magnitude really feasible? We spent half that and had trouble with

by nhebb 15y ago

I remember Krugman writing that a $1.5 billion stimulus was needed, but is a stimulus of that magnitude really feasible? We spent half that and had trouble with funding enough "shovel ready" projects. I think it's harder to infuse $1.5 trillion into an economy than he takes for granted, without pissing much of it away.

jonknee 15y ago
We didn't spend close to that on stimulus, $288B were direct tax breaks to individuals and companies. Most of the rest went to bailing out programs suffering from the lack of incoming tax dollars (Medicaid, education, food stamps, unemployment insurance, etc). It's great that kids continued to get healthcare, and teachers didn't get the axe, but that doesn't cut it for what I'd consider "stimulus". Just $105B went to "infrastructure" and was highly politicized to the point projects became difficult to find (for example my governor, one of the least popular in the country, refused [billions of] stimulus money for rail because it was Obama's idea). Republicans were looking at any chance to make the stimulus look like a failure since it wasn't their idea while at the same time looking to take any money they could for their districts. Basically dump on the big obvious projects and then take credit for saving teacher jobs and doing minor infrastructure work all the while not mentioning where the funds came from. It's pathetic. Even being a tiny chunk, the infrastructure portion has been noticeable where I live. There are two stimulus funded housing developments going up within walking distance, the Federal Court House down the block is getting a much needed retrofit, bridges are being repaired, etc etc.
jellicle 15y ago
So you're going to argue both sides of the question? You're really going to argue that every trick in the book has been tried, and that the amount that non-lying economists recommended to spend wasn't feasible? Which is it? In actuality, the correct answer is that there are a vast supply of projects going undone for lack of money - crumbling bridges, roads, water pipes, sewer pipes, high-speed rail, just to get started - and that if there had been the political will to spend money on those types of manpower-intensive projects, the economy would be in much better shape today. (You get new bridges, smooth roads, AND a working economy.) Instead a vast amount of money was spent, most of it going to benefit a few thousand of the richest people in the U.S., who have dutifully saved their profits in off-shore tax havens, creating no economic benefit.
- nhebb 15y ago
  I'm not arguing. Economics is so closely tied to politics that economic debates become just as tedious as political ones. When I think of economics, I think of the quote by statistician George Box, "All models are wrong. Some are useful." Economic models are more prone to error than mathematical models in science because they are so complex and can't really account for the human element. And ultimately, their usefulness is subject to their ability to be implemented.
  - Spyro7 15y ago
    I did not down-vote you (as a matter of fact, I up-voted you because I am not a fan of ninja down-voters and I think that you ask interesting questions). However, it is evident that you are not a formally trained economist. Economics is not closely tied to politics. If you ever want to have a look at what real economics is, please go to http://ssrn.com/ http://ssrn.com/ and read some economic articles on subjects that interest you. One thing that you will rapidly notice is that politics has almost nothing to do with formal, academic Economics (and this consitutes the great bulk of the activity that goes on in the field of Economics). It is worthwhile to distinguish between normative economics and positive economics. Positive economics, which constitutes the majority of the discipline, seeks to describe, explain, and record economic phenomena. Normative economics, which is the louder minority, seeks to prescribe solutions to problems by using economic theory. The problem with modern Economics is that the loudest voices within the field are listened to because of their political viewpoints and not their economic expertise. Dr. Krugman in particular has the habit of mixing normative and positive economics without providing a careful distinction between the two. This is a huge problem, and it makes the entire field look bad. However, what can economists that are not popular do about this? The mass media has very little interest in impact studies of obscure policy changes done in third world countries, so we just keep churning away in the background. While I would not say that George Box is wrong outright, I would say that this quote from him is not entirely accurate as it could be when applied to Economic modelling. You see, by definition an Economic model is merely a simplification of a real world phenomena. Of course, all simplifications are "wrong" because they are not intended to be "right" they are merely intended to be approximations. Economic models are more prone to error than Mathematical models and models in the Natural sciences because they are, in essence, brutally simple models of Human behaviour. Their usefulness is not subject to their ability to be implemented, but is is subject to the context of the problem at hand and what the expectations are for the model. For example, one thing that I did recently was to analyze some time series data to analyze a market for seasonality. The predictions of my model for the next two quarters were not even close to being exact, but the seasonality estimates were spot on. A model's usefulness must be determined within the context of its overall purpose.

by nhebb 15y ago

jonknee 15y ago

We didn't spend close to that on stimulus, $288B were direct tax breaks to individuals and companies. Most of the rest went to bailing out programs suffering from the lack of incoming tax dollars (Medicaid, education, food stamps, unemployment insurance, etc). It's great that kids continued to get healthcare, and teachers didn't get the axe, but that doesn't cut it for what I'd consider "stimulus". Just $105B went to "infrastructure" and was highly politicized to the point projects became difficult to find (for example my governor, one of the least popular in the country, refused [billions of] stimulus money for rail because it was Obama's idea). Republicans were looking at any chance to make the stimulus look like a failure since it wasn't their idea while at the same time looking to take any money they could for their districts. Basically dump on the big obvious projects and then take credit for saving teacher jobs and doing minor infrastructure work all the while not mentioning where the funds came from. It's pathetic. Even being a tiny chunk, the infrastructure portion has been noticeable where I live. There are two stimulus funded housing developments going up within walking distance, the Federal Court House down the block is getting a much needed retrofit, bridges are being repaired, etc etc.

jellicle 15y ago

So you're going to argue both sides of the question? You're really going to argue that every trick in the book has been tried, and that the amount that non-lying economists recommended to spend wasn't feasible? Which is it? In actuality, the correct answer is that there are a vast supply of projects going undone for lack of money - crumbling bridges, roads, water pipes, sewer pipes, high-speed rail, just to get started - and that if there had been the political will to spend money on those types of manpower-intensive projects, the economy would be in much better shape today. (You get new bridges, smooth roads, AND a working economy.) Instead a vast amount of money was spent, most of it going to benefit a few thousand of the richest people in the U.S., who have dutifully saved their profits in off-shore tax havens, creating no economic benefit.

nhebb 15y ago
I'm not arguing. Economics is so closely tied to politics that economic debates become just as tedious as political ones. When I think of economics, I think of the quote by statistician George Box, "All models are wrong. Some are useful." Economic models are more prone to error than mathematical models in science because they are so complex and can't really account for the human element. And ultimately, their usefulness is subject to their ability to be implemented.
- Spyro7 15y ago
  I did not down-vote you (as a matter of fact, I up-voted you because I am not a fan of ninja down-voters and I think that you ask interesting questions). However, it is evident that you are not a formally trained economist. Economics is not closely tied to politics. If you ever want to have a look at what real economics is, please go to http://ssrn.com/ http://ssrn.com/ and read some economic articles on subjects that interest you. One thing that you will rapidly notice is that politics has almost nothing to do with formal, academic Economics (and this consitutes the great bulk of the activity that goes on in the field of Economics). It is worthwhile to distinguish between normative economics and positive economics. Positive economics, which constitutes the majority of the discipline, seeks to describe, explain, and record economic phenomena. Normative economics, which is the louder minority, seeks to prescribe solutions to problems by using economic theory. The problem with modern Economics is that the loudest voices within the field are listened to because of their political viewpoints and not their economic expertise. Dr. Krugman in particular has the habit of mixing normative and positive economics without providing a careful distinction between the two. This is a huge problem, and it makes the entire field look bad. However, what can economists that are not popular do about this? The mass media has very little interest in impact studies of obscure policy changes done in third world countries, so we just keep churning away in the background. While I would not say that George Box is wrong outright, I would say that this quote from him is not entirely accurate as it could be when applied to Economic modelling. You see, by definition an Economic model is merely a simplification of a real world phenomena. Of course, all simplifications are "wrong" because they are not intended to be "right" they are merely intended to be approximations. Economic models are more prone to error than Mathematical models and models in the Natural sciences because they are, in essence, brutally simple models of Human behaviour. Their usefulness is not subject to their ability to be implemented, but is is subject to the context of the problem at hand and what the expectations are for the model. For example, one thing that I did recently was to analyze some time series data to analyze a market for seasonality. The predictions of my model for the next two quarters were not even close to being exact, but the seasonality estimates were spot on. A model's usefulness must be determined within the context of its overall purpose.