It's not a naive question. She was on the verge of re-inventing Keynesian Economics, which ended the Great Depression.

https://www.investopedia.com/terms/k/keynesianeconomics.asp

>> Keynesian Economics, which ended the Great Depression

This is a pretty bold claim and not one that should be stated as fact.

Keynesian Economics kept Australia out of recession in 08. They literally gave everyone 800 bucks. It was awesome, went out a bit more, bought lots of takeout and a few bits for around the house. And the economy kept moving.

Now if only i could figure out a way to get more people to live in my SIM tower!

Yeah, I'm sure that mining boom had nothing to do with it...

Why stop at 800?

Give everyone a million bucks and you'd have a booming economy.

That's a bit of a lame argument, along the same lines as the 'trickle down' effect.

It probably depends on whether your economy is limited by consumer demand or by insufficient investments. For most developed nations it is clearly limited by consumer demand. Giving rich people more money aka 'trickle down' won't get the rich people to invest, because there is no demand (normal people already spend more than 100% of their income)

In this situation giving away money helicopter style makes sense.

What are the competing theories? The most common one is "WWII", which is another way of saying "Keynesian Economics"

There's a ton of competing theories that like to point out that previous depressions lasted a year or two while the Great Depression went on and on because of all the government interventions that prevented the economy from being able to recover.

Luck and variance are pretty good explanations, though people tend to hate them. The idea that every thing in the universe has to have a specific cause and effect plagues a lot of "analysis" in today's world. We simply aren't built for accepting luck.

Bernanke on the lessons learned: https://www.federalreserve.gov/newsevents/speech/bernanke201...

Sounds more monetarist: https://www.investopedia.com/ask/answers/012615/what-differe...

"If people doesn't have money, why doesn't the government print money and gives it to people?"

Because people are not systemically important financial institutions :)

They sort of are though. It's just that a person's importance isn't individually obvious, and only becomes obvious in aggregate.

It definitely is not a naive question. Printing money is precisely what the government should do. Income tax should be eliminated, it is a relic of the past. The government should fund itself not by selling bonds, which essentially is printing money that pays interest, but by simply printing money which is more direct.

To put a finer point on it, most people still believe that (monetarily sovereign) governments are constrained by their income and by the willingness of lenders to accommodate government debt. But that view is incorrect: the real constraint to government spending is only the economy's real capacity for production. Another way to think of it is that the real constraint to government spending is inflation (because excessive government spending beyond the economy's supply capacity would lead to increased demand-pull inflation).

Whatever the reason, the empirical observation in these days of low inflation seems to be that most governments aren't even close to the true limit of spending.

Uh, this is a very interesting (and intriguing) perspective.

Couple of questions:

- Does this mean that there’s a case for QE to be made permanent under a low-inflation environment?

- Under this model, govermnents would be directly responsible for the allocation of the newly created money. How can this not lead to a depressed economic output over time?

- Where can I read more about this?

QE: Not really. The problem with QE is that it's a purely monetary operation, so the only way it could lead to real economic growth is if it somehow lead to more lending. But arguably debt leads to instability, and besides it's like pushing on a string: it doesn't work when people don't want to borrow. It'd be better for the government to outright buy stuff or give people money.

Depressing economic output: Absent inflation, economic output is proportional to overall spending, so a policy like this can't depress economic output almost by definition.

However, I'd say there is a risk of directing that output towards useless things, plus there's the risk of favouritism that leads to hidden inflation via inefficiency (see also: military industrial complex). So it matters where the money is spent.

Personally, I'd like to try something like a "citizen's dividend": just hand out money to all citizens equally each month (or permanent residents, you can argue the details), no questions asked and no strings attached, but vary the amount based on current inflation. That is, increase the dividend when inflation is low, scale it back when inflation rises above some target.

So kind of like a UBI, but with a macroeconomic motivation rather than trying to replace the welfare system. It also appeals to me because it's a sort of direct democratic approach to macroeconomic management: people can literally vote with their wallet about how the money is spent.

Where to read more: modern monetary theory is a good keyword to start with. I found Randall Wray's book very interesting. Warren Mosler's "7 deadly innocent frauds" is less academic, but it's available online and interesting since it comes from a practitioner instead of a theoretician. Though I admit it's been many years since I read either.

My naive question is why so few governments or central banks tried implementing QE as helicopter money, rather than for bond purchases. It seems to my (undergrad-only econ) perspective that the person in the street is far more likely to put the money to use in the economy.

Bond purchases or helicopter money is essentially the same thing.

1) The government sprays more money around in welfare and salaries than they raise through taxes

2) The government issues bonds

3) The central bank prints money to buy those bonds

It's equivalent to the central bank printing money to pay for welfare programs and salaries (which go to common people in the streets)

QE books purchases aren't about allowing the government to borrow more. In any rich country the government can borrow as much as it wants. It's about crowding out private purchases of those bonds so that those lenders will lend to businesses and people instead. I'd be willing to bet that a $1000 tax refund is more likely to be spent than an extra $1000 that banks may or may not lend to someone.

I disagree, buying bonds benefits above all bond holders, read funds and investment banks. The people only get the money way down in the food chain.

I've been wondering the same thing. A few points come to mind:

It's easy trot out the "but the bureaucracy!" argument.

Helicopter money is in-your-face money creation which brings out the gold bugs and inflation hyperventilators. QE as practiced is in comparison too mysterious for people to latch on to effectively.

Helicopter money was never really championed by anybody in the first place, so nobody really had to argue against it.

It's really unfortunate that a perfectly reasonable policy never got a fair chance. I do think it has a lot to do with ideological bias especially among central bankers, and with the fact that a lot of people on the left, who should naturally be in favour of such a policy, are too averse to studying economics and finance thoroughly enough to participate effectively in such discussions.

Playing games would have made it impossible to imagine Qualitative Easing? I played a lot of SimCity and it taught me that tradeoffs are very real and that mayors have a tough job; but it didn't stop me from independently coming up with the idea of qualitative easing as it happens. Still, I take the point, one can't use QE every time or in just any year to avoid a tradeoff - only when deflation is a real possibility.

What? When is monetary policy ever an issue in SimCity? How does managing a city's resources, revenue, or budget teach you anything about that?

SimCity, Red Alert, AoE so much time playing on them. I’m not sure what they teach me but I’m confident it exposed me to problem solving and persistance which are always useful skills.