The Booth School of Business at the University of Chicago recently decided to take the wisdom-of-the-crowds (or at least of-the-economists) approach to deciding whether or not the Obama Administration's stimulus package, the latest salvo in the Keynes-Hayek deathmatch, reduced unemployment:
Depending on your view of things, this might seem totally obvious—goverment places order for widgets, people are hired to make and install widgets—but Brad DeLong summarizes the opposition:
At the time, back at the start of 2009, arguments that the Recovery Act would not push the unemployment rate down over the two years after its enactment took one of three lines:
Unemployment is really not cyclical but structural, so whatever boost to spending it might generate would show up in higher prices and wages as businesses trying to satisfy demand bid against each other for a fixed pool of non-zero-marginal-product workers.
Government purchases must be financed by issuing government debt, and debt issues would push up interest rates and so would discourage private investment spending.
Government purchases must be financed by issuing government debt, and the future taxes needed to amortize the extra debt would frighten businesses and investors, so we would see equity prices tank as this fear would discourage private investment.
In the responses, the U. of C.'s Richard Thaler pushes things further:
Even clearer by 2011. Why ask about 2010 when much of the stimulus is slow acting? The stimulus project on my way to work just finishing.
The poll also asked a second question, which got more tempered agreement. Policy: it's hard.
As an example, here's what Dickensianly named U. of C. prof and former Obama campaign/administration advisor Austan Goolsbee answered for the first question (strongly agree, confidence nine):
quit with the politics and just go read the official ARRA reports for a review of the evidence
On the second (agree, confidence five):
This all depends on how much you value avoiding short-run collapse versus the costs long-term. But it’s not free.
Keynes and Hayek, second round.