A Little Economic Realism

By DAVID BROOKS
NYT

Let’s say you’re the leader of the free world. The economy is stuck in the doldrums. Naturally, you want to do something.

Many economists say we need another stimulus bill. They debate about whether the stimulus should take the form of tax cuts or spending increases, but the ones in your party are committed to spending increases. They trot out a plausible theory with computer models to go with it. If the federal government borrows X amount of dollars and pumps it into the economy, that would produce Y amount of growth and Z amount of jobs. In a $14 trillion economy, you’d probably have to borrow hundreds of billions more to have any noticeable effect, but at least you’d be doing something to help the jobless.

These Demand Side theorists are giving you a plan of action. But you’re not a theorist. You’re a practical executive, and you have some concerns.

These Demand Siders have very high I.Q.’s, but they seem to be strangers to doubt and modesty. They have total faith in their models. But all schools of economic thought have taken their lumps over the past few years. Are you really willing to risk national insolvency on the basis of a model?

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