Thursday, March 22, 2012

Picture of the Day: Stimulus v. Austerity

I am grading, grading, grading today so I'll resort to the good ol' picture of the day.  This one from Krugman who uses it as a provocation for those that claim that resorting to stimulus rather than austerity has slowed our recovery.


While the US has used fiscal stimulus the UK has gone whole hog on austerity and here are the results.  Is this a good natural experiment?  Can we reasonably draw conclusions from this?  Discuss below.  Oh wait, Spring break has begun for most of the OSU students out there so nevermind - go empty your minds and soak in some sun while us poor faculty are knee deep in snow grading endlessly...

3 comments:

Doug Gabbard said...

No, you can't draw conclusions based on GDP alone, because GDP can be manipulated by governments spending money that they don't have. Perhaps a better comparison would be GDP net of the incremental present value of future debt service. Even if that is not the right measure, we have to get out of the habit of sacrificing the public fisc on the altar of output.

H. A. Weaselton said...
This comment has been removed by the author.
Christopher Friesen said...

We should not draw conclusions because we simply do not have a large enough sample. Even if we grant that fiscal stimulus helped the United States out of recession, we cannot be certain that the conditions in the United Kingdom will have the same effect.