Tumblr Icon RSS Icon

“Taking Money From One Place and Giving it To Another Place”

By Matthew Yglesias  

"“Taking Money From One Place and Giving it To Another Place”"

Share:

google plus icon

Fist of Money 1

John Cochrane says on PBS that “the idea that [the American Recovery and Reinvestment Act] was going to raise output or increase employment, I don’t think has panned out” because “the stimulus, in the end, is taking money from one place and giving it to another place.”

This seems like an extremely naive argument. Compare: The idea that Larry & Sergey’s Internet company was going to raise output or increase employment, I don’t think has panned out because the initial venture capital investment, in the end, is taking money from one place and giving it to another place? The idea that Jamie’s bank was going to raise output or increase employment, I don’t think has panned out, because all the bank does, in the end, is take money from one place and give it to another place? Taking money from someplace and putting it someplace else is just what economic activity consists of. It’s true that government spending could be merely displacing private sector investment which is why you don’t normally want a giant budget deficit but there’s no detectable crowding out right now.

This “money doesn’t grow on trees” argument has a kind of faux commonsense quality to it, but accepting it would render it extremely mysterious how economies can ever grow.

‹ Taxpayer-Subsidized Parking Garages

Setback for Public Option Revival as Rockefeller Says No ›

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.