5 ms·
The problem here is you rely too much on models. I'm not saying you're wrong but you're certainly too sure of yourself. Economic Models, by definition, have t
by TomOfTTB 15y ago
The problem here is you rely too much on models. I'm not saying you're wrong but you're certainly too sure of yourself.
Economic Models, by definition, have to make assumptions on psychology. Those assumptions can often be wrong and that invalidates the model.
To put this in real terms lets look at the construction worker. Say the government, as the spender of last resort, starts a bunch of construction projects. The economic theory here is the construction worker will get a job which will put money in his pocket. He will then go out and spend that money which will cause the places where he spends his money to hire more people. That starts a virtuous cycle that gets the economy out of trouble.
The problem with that is, in my experience, the construction worker doesn't think that way. He's been unemployed for a year or more already so instead of spending he takes every spare cent and saves it for a rainy day. Because the construction job is finite. Since he was already getting government subsidized aide as an unemployed person the money he spends on food and other essentials is negligible. So if he saves his extra money then the government spending has no impact on the economy (until he's forced to use that money by a crisis)
Again there are valid arguments on both sides but your certainty that your side is right seems naive (and that's being polite to you)