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Four criticisms I would have of my own logic are:
- There may be distributional reasons why you would want to change spending,
- An “improvement” in government spending would be beneficial,
- 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.
- Fiscal policy is better targetted.
My answers to these would be:
That is the topic of my Dom Post article this week.