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Wednesday, May 20, 2009

Mario Rizzo on stimulus

[S]pending can beget spending. But so what?

Some Keynesians will say that the spending will lift resources out of idleness and almost any use of these resources will be of greater value than idleness.

Today’s idleness is waiting for the sky to clear, that is, it is the consequence of trying to figure out, amid the process of liquidation of resources in over-expanded sectors, the appropriate areas for new investment. The true value of this idleness is imputed from the value of the improved resource allocation that it permits.

It would be great, of course, if (1) it took no time to re-allocate resources, or (2) it did not matter where resources were employed as long as they are employed. But each of these statements is clearly untrue.

-- from "Economic Confidence: An Empty Box?" (May 17, 2009) by Mario Rizzo at http://thinkmarkets.wordpress.com/2009/05/17/economic-confidence-an-empty-box.

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