WAS THE STIMULUS INSUFFICIENT?

WAS THE STIMULUS INSUFFICIENT? Kids, you know I am a Keynesian and that I think, in retrospect, that the stimulus should have been bigger or that there should have been a second stimulus when it seemed apparent that the first stimulus was not big enough. Here and here are some brief appraisals of the stimulus by some very good economists, including Brad DeLong and Tyler Cowen. I particularly note Brad DeLong’s comment that: “-their Plan A was OK given what they did not know in December 2008, but two months later it was clear that a Plan B was needed and then a Plan C and a Plan D.” My one comment is that policy making in this situation would have been a lot easier if we all had become accustomed to discussing policies in terms of probabilities. That is, it would have been easier to move to Plan B if it had been customary to announce that the right policy—in this case, the right amount of the stimulus—was not known for certain, that Plan A was only a first approximation and that the amount in Plan A would be reviewed as more information came in. It would also have helped if there had been more of a public debate about what the initial amount should have been. Of course, the stimulus issue was probably too big and controversial an issue to begin discussing policies in terms of probabilities and in terms of adopting policies that will be changed as more information is obtained.