Crash

Recently I’ve been finding all I’ve learned about economics turned on its head. As someone recently graduated from a university undergraduate program, I am not too far removed from economic abstraction. How economics should work, an ideal if you will.  Real world effects either confirm or confuse what’s been learned in the classroom. One such effect is to see how two accepted economic models react to a recession. On one side, we have the microeconomic model of the firm and it’s pathway to success, and on the other, the macroeconomic model of growth of a domestic economy. I accepted both of these models from lesson one. Now I see how one can work against another.

Please don’t stimulate my economy…

Country Politician - George Bingham

In my other recent blog, In Defense of Capitalism, I argued that increased government activity would exacerbate this crisis. I argued that, in the long-run, investment will fix itself. As I read the news, I hear good and bad things. I cringe when I hear that the government is going to spend $850 billion for a stimulus package. But, I am encouraged when Barack Obama wants to cut taxes to stimulate the economy. I fear that government spending, on this scale, is bound to be inefficient and may makes things worse. But, I also know that tax cuts tend to stimulate economies in the long run. When people can spend their own money, they tend to benefit an economy. Money is invested wisely, looking for returns. The government is a bureaucratic mechanism that is extremely slow to work. When it does finally work, it tends to lend and trade favors not always for the social economic good. Governments tend to overspend on shotty merchandise. You need only look at the J. Edgar Hoover building to see how poorly the American government spends its citizens’ money. What makes you think they will use $850 Billion any wiser?