I think that a majority of economists agree that in many downturns, it helps the economy if people, on the margin, spend a little more. This justifies Keynesian stimulus. Therefore, the economy would be helped if your choice increases the total amount of money changing hands …
Imagine that the “economy” is sluggish, and that a widget maker currently profits $1 on each widget sale. Now, consider these two scenarios:
a) I buy 100 widgets that I don’t want, in order “to help the economy”. b) I give the widget-maker $100. Then, I lie and say, “OMG!!! I just heard that demand for widgets is SURGING, you’ve GOT to make more than usual!” (Assume they trust me.)
In both cases, the widget-maker is $100 richer, the real resources in the economy are unchanged, and the widget-maker has gotten a false signal that more widgets should be produced. Yet one of those “helps the economy”, while the other doesn’t? How does that make sense?
If you believe that either one of those “helps the economy”, your whole view of “the economy” took a wrong turn somewhere.
I agree that both a) and b) would have a similar effect in that the widget manufacturer puts to work resources (labor, machines) which would otherwise not be utilized. I wouldn’t recommend either a) or b) because there are many more efficient ways to stimulate the economy. One that my father, who happens to be an economist, has promoted is a temporary tax credit for new hires. More detail. If there are some roads you were going to build a couple years from now, speeding up that investment is probably a good idea in an economic downturn. I’m not defending legislation that actually got passed… I try not to pay too much attention.
I agree that both a) and b) would have a similar effect in that the widget manufacturer puts to work resources (labor, machines) which would otherwise not be utilized. I wouldn’t recommend either a) or b)
Then why did you say this, in the very comment I was replying to?
Therefore, the economy would be helped if your choice increases the total amount of money changing hands,
That’s the same as recommending a)!
because there are many more efficient ways to stimulate the economy
It doesn’t matter that you can think of better ways; the problem is with a view of the economy that regards either of a) or b) as “good for the economy”. And you in fact hold that view.
We were asked a sort of odd question which was which apartment choice would help the economy when not taking into account the individuals preferences about apartments. Those preferences in fact dominate the overall effect on the economy. I wouldn’t recommend anyone personally attempting Keynesian stimulus.
Increasing the amount of money changing hands only helps in certain circumstances, and even then it is not necessarily the dominant effect.
What about the examples of intelligent stimulus I offered?
Imagine that the “economy” is sluggish, and that a widget maker currently profits $1 on each widget sale. Now, consider these two scenarios:
a) I buy 100 widgets that I don’t want, in order “to help the economy”.
b) I give the widget-maker $100. Then, I lie and say, “OMG!!! I just heard that demand for widgets is SURGING, you’ve GOT to make more than usual!” (Assume they trust me.)
In both cases, the widget-maker is $100 richer, the real resources in the economy are unchanged, and the widget-maker has gotten a false signal that more widgets should be produced. Yet one of those “helps the economy”, while the other doesn’t? How does that make sense?
If you believe that either one of those “helps the economy”, your whole view of “the economy” took a wrong turn somewhere.
I agree that both a) and b) would have a similar effect in that the widget manufacturer puts to work resources (labor, machines) which would otherwise not be utilized. I wouldn’t recommend either a) or b) because there are many more efficient ways to stimulate the economy. One that my father, who happens to be an economist, has promoted is a temporary tax credit for new hires. More detail. If there are some roads you were going to build a couple years from now, speeding up that investment is probably a good idea in an economic downturn. I’m not defending legislation that actually got passed… I try not to pay too much attention.
Then why did you say this, in the very comment I was replying to?
That’s the same as recommending a)!
It doesn’t matter that you can think of better ways; the problem is with a view of the economy that regards either of a) or b) as “good for the economy”. And you in fact hold that view.
We were asked a sort of odd question which was which apartment choice would help the economy when not taking into account the individuals preferences about apartments. Those preferences in fact dominate the overall effect on the economy. I wouldn’t recommend anyone personally attempting Keynesian stimulus.
Increasing the amount of money changing hands only helps in certain circumstances, and even then it is not necessarily the dominant effect.
What about the examples of intelligent stimulus I offered?