Wednesday, May 13, 2009

Government Failure: Economic Surrealism Comes to Washington

Mankiw's Blog on the shabby standards set by the administration to evaluate the stimulus bill:

The stimulus bill Congress passed a few months ago apparently requires the Council of Economic Advisers to report quarterly on the employment effects of the act. That job is, essentially, impossible. Because we have only one economy, there is no way to know for sure what would have happened without the stimulus bill. It is like asking a doctor, "How much sicker would this particular patient have been if you had not given him treatment up to now?" You can get, as an answer, the doctor's subjective professional judgment, but you cannot expect objective measurement. ...
Here is the question I would have asked: "Going forward, what macroeconomic data would you have to observe before you concluded that the stimulus bill has been a failure? Or will you conclude, no matter how bad things get, that the economy would have been in even worse shape without the stimulus? And if the latter is the case, aren't these quarterly reports just a bit surreal?"

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