tag:blogger.com,1999:blog-3448927642739850334.post4507744110800011234..comments2023-10-29T08:06:00.610+00:00Comments on The Political Economist: The problem with stimulus (in local government spending)Vuk Vukovichttp://www.blogger.com/profile/01878567452492217960noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-3448927642739850334.post-58464103260810389612013-02-06T17:36:26.457+00:002013-02-06T17:36:26.457+00:00It would have a negative effect on net exports and...It would have a negative effect on net exports and hence a negative effect on GDP growth. But yes, Meltzer makes it more straightforward Vuk Vukovichttps://www.blogger.com/profile/01878567452492217960noreply@blogger.comtag:blogger.com,1999:blog-3448927642739850334.post-45796618686368631232013-02-05T22:23:06.424+00:002013-02-05T22:23:06.424+00:00So I want to understand this. If Britain (for inst...So I want to understand this. If Britain (for instance) wanted to do a Keynesian fiscal stimulus, then the price of domestic goods and services would rise contra imports? I am not sure what effect, if any that would have on economic growth. However, Meltzer's description of Japan's woes is easy to understand. In addition you have the evidence that nation's with a high debt simply do not have much growth.KyleNhttps://www.blogger.com/profile/15766641765942339253noreply@blogger.comtag:blogger.com,1999:blog-3448927642739850334.post-30333477923007941392013-02-03T21:12:51.409+00:002013-02-03T21:12:51.409+00:00I'm glad to have read these texts on the fault...I'm glad to have read these texts on the faulty of fiscal stimulus and deficit spending approaches (both this one and the one before that). The "textbook solution" to crises is proving to be more and more wrong and what bemuses me is the increasing number of people subscribing to this failed approach.. John Turpinhttps://www.blogger.com/profile/03146853575797586917noreply@blogger.comtag:blogger.com,1999:blog-3448927642739850334.post-49538898905060419182013-02-03T19:31:15.575+00:002013-02-03T19:31:15.575+00:00Those are some very good points. Meltzer is a grea...Those are some very good points. Meltzer is a great economist, I recommend his newest excellent book <a href="http://www.themontrealreview.com/2009/Why-Capitalism.php" rel="nofollow">"Why Capitalism"</a> <br /><br />I'm glad you haven't :)<br /><br />Vuk Vukovichttps://www.blogger.com/profile/01878567452492217960noreply@blogger.comtag:blogger.com,1999:blog-3448927642739850334.post-15591891926103295132013-02-02T19:22:56.004+00:002013-02-02T19:22:56.004+00:00"This was one of my biggest questions for the..."This was one of my biggest questions for the proponents of fiscal stimuli: Why would they expect that the model version would work in a world with imperfect agents? Particularly if these imperfect agents lack real accountability? "<br />Love to hear the answer to this one :D<br /><br />Love the concept in Fujiwara and Ueda , Im definitely going to try to find time to read the paper (among other things Im trying to find time for :D). <br /><br />Here's Allan Meltzer on the issue of fiscal stimulus in Japan, from an older paper I read a few weeks ago :<br />"As public debt mounted, the risk increased that the government would have to renege partially on its pension and healthcare promises. The public responded by increasing saving relative to GDP, offsetting part of the effect of fiscal stimulus. Believing their pensions were threatened, households tried to restore personal wealth. The more they responded this way, the smaller the effect of fiscal expansion on GDP. The government's response was to further increase the fiscal deficit absolutely and as a percentage of GDP.<br /> Further, much of the fiscal stimulus took the form of public works with low contribution to productivity and high maintenance cost. A rational person could not believe that today's government spending would yield higher future incomes that would pay the unfunded liabilities for pensions and health care or service the debt. Perhaps tax cuts that helped the public to restore its desired wealth position would have helped the public to achieve its goal and, thus, slow the increase in the saving rate. Deregulation that increased efficiency and productivity would have had a positive effect also. "<br /><br />I normally dont view savings as something bad, but I think in Japan additional savings basically helped fuel more government consumption reinforcing the vicious circle described above, while delaying the restructuring of broken banking system clogged channels for private (more efficient) allocation.<br /><br />I guess you wouldnt agree with Sumner on the need for monetary policy rule which would imply more easing at this point lol, but more on that on market monetarism post ;) (I havent forgot)Anonymoushttps://www.blogger.com/profile/02665089266421768740noreply@blogger.com