Re:Obama Gives Keynes His First Real-World Test
by anamax on Sunday February 01, 2009 @11:57PM
(#461884)
> By spending $650 billion we can make up that difference in output with the help of Keynesian multipliers.
Only if the multiplier is significnatly greater than 1. One of Obama's advisors made her bones showing that the multiplier for govt spending tended to be around 1 at and that the multiplier for tax cuts was around 1.5 both at current levels.
"at current levels" is important. If the multiplier is always greater than 1, the right thing to do is to have an infinitely large stimulus because the return will likewise be infinite. Does anyone believe that would happen?
Only if the multiplier is significnatly greater than 1. One of Obama's advisors made her bones showing that the multiplier for govt spending tended to be around 1 at and that the multiplier for tax cuts was around 1.5 both at current levels.
"at current levels" is important. If the multiplier is always greater than 1, the right thing to do is to have an infinitely large stimulus because the return will likewise be infinite. Does anyone believe that would happen?