Crowding Out DeLong: A Clarification

by Mario Rizzo  

“What it [the total of stimulus-created or saved jobs — MR] doesn’t consider are the jobs lost due to the very policies that are “saving” jobs. Government can only spend what it takes from the private sector one way or another, either through taxation, borrowing, or the redistribution effects of inflation. For every dollar that government spends, there is one less dollar being spent somewhere else in the economy. The jobs that weren’t created because the private sector lacked access to capital due to increases in government borrowing should be offset against whatever jobs the stimulus supposedly is creating.”  Steve Horwitz.   

Brad DeLong says (in the comments below my previous post) that I got Steve Horwitz’s point about crowding out wrong and therefore my defense of Horwitz is inappropriate. Furthermore, then, I miss the importance of DeLong’s evaluation that Horwitz is incompetent.  

First, and most important, I did not intend my post to be primarily a defense of Horwitz and therefore an implicit criticism of DeLong in his criticism of Horwitz. (Got that, readers?)

I intended to say simply that (1) DeLong is wrong for not worrying about crowding out in its various dimensions; and (2) that someone who worries about crowding out, like Steve Horwitz, is therefore not clueless or worse. Continue reading

Crowding Out Brad DeLong

by Mario Rizzo  

Brad DeLong thinks that, under present circumstances, the crowding out of private expenditure by fiscal stimulus is not a live issue. The basic argument is that since neither average wages nor interest rates have risen in response to stimulus, no resources are being diverted from private to public uses. 

I am unsure what the standards of good analysis are among Keynesian macroeconomists, so I proceed with some trepidation. However, as readers of this blog will know, I am unhappy with the level of macro-aggregation usually practiced by both Keynesian and new-classical macroeconomists. So I want to disaggregate the analysis a bit.   Continue reading

Stumbling on profit opportunities

by Sandy Ikeda

I’ve been thinking about the following from Daniel Gilbert’s Stumbling on Happiness:

Experiments have demonstrated that the moment we encounter an object, our brains instantly analyze just a few of its key features and then use the presence or absence of these features to make one very fast and very simple decision:  “Is this object an important thing to which I ought to respond right now? […] As such, our brains are designed to decide first whether objects count and to decide later what those objects are.  This means that when you turn your head to the left, there is a fraction of a second during which your brain does not know that it is seeing a wolverine but does know that it is seeing something scary (Emphasis original, p.62). Continue reading