The visible hand in economics

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In today’s Dom Post column we discuss whether a fiscal stimulus is necessary at the moment – our conclusion is that it is not.

Four criticisms I would have of my own logic are:

  1. There may be distributional reasons why you would want to change spending,
  2. An “improvement” in government spending would be beneficial,
  3. In the face of sticky prices and reference based utility from consumption (that marginal utility from consumption depends on consumption in the previous periods) there could be a role for stabilisation even if the shock is permanent.
  4. Fiscal policy is better targetted.

My answers to these would be:

Read the rest of this entry »

That is the topic of my Dom Post article this week.

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