Monday, November 30, 2009

Macroeconomic Policy a la Paul Krugman

I will confess to not fully understanding macro and balancing long term growth with short term need. So while I know there are arguments for reducing the Federal deficit, what Krugman says in this piece makes sense to me. He has been arguing for this sort of thing for some time. The first paragraph below does give a macroecon sense of the issues the University will face in the coming years. On the second paragraph, after the bridge over the Mississippi River in Minneapolis failed a few years ago, I thought we'd see a public works program to address that issue, not fundamentally as a jobs program, just because our bridge infrastructure needs an upgrade. So I'm asking, why not put two and two together?


  1. Whenever I read an economic article, I always think it makes sense---and then I read the opposing view and that makes sense too. I agree with you with the need to reduce the unemployment rate, and I feel that that should be a priority. However, I guess the argument against creating jobs through bridge infrastructure is whether those jobs would be sustainable. Would building a bridge just be a one-time project that temporarily alleviates unemployment but will then bounce back?

  2. Old style Keynesian macro posits a "multiplier effect." The earnings from these government created jobs gets spent on goods and services that justifies the creation of other jobs in the private sector, which gets the economy to grow again.

    That's one thought, though I believe it is generally agreed that such Government Spending did not end the Great Depression until World War II, where the deficits were massive but most everyone could agree that there really wasn't an alternative. Then afterward, the GI bill kept the returning veterans from flooding the labor market immediately.

    The other thought is that none of us wants to be on one of those bridges when it collapses.