Stimulus 101

This Dummy Found It Enlightening

Megan McArdle explains (in plain English, no less) everything you need to know about stimulating the economy.  A sample:

Question #1 Will a fiscal stimulus work?

Define “work”. If the question is “Can borrowing money and spending it increase our measured GDP figure?” then yes, it is trivially true that stimulus “works”. So why don’t we borrow a zillion dollars and spend all of it? We could quadruple our standard of living overnight?

Because fiscal stimulus “working” is more than a question of increasing measured GDP. In every other context, liberals are all too aware of the limitations of GDP as a proxy for human wellbeing. In the context of the stimulus debate, however, all those reservations seem to fly right out of their heads.

When we ask “does it work” what we’re really asking is “Will it increase our overall well-being?”

It’s long, but definitely worth while.

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