The Nobel Committee already proved that the prize was a joke years ago by giving the Peace Prize to Yasser Arafat.
Now we have the prize awarded in Economics to Eugene Fama, a University of Chicago (bad choice right off the bat) professor who got the award for saying this?
In a "fiscal stimulus," the government borrows and spends the money on investment projects or gives it away as transfer payments to people or states. The hope is that government spending will put people to work, either directly on government investment projects or indirectly through the consumption and savings decisions of the recipients of government spending. The current stimulus plan adds up to about $750 billion. Will it work? Unfortunately, there is a fly in the ointment. Like the auto bailout, government infrastructure investments must be financed -- more government debt. The new government debt absorbs private and corporate savings, which means private investment goes down by the same amount.
Seriously?
A casual glance at any one of a number of charts showing the relationship between private savings and government deficit spending (borrowing) would show the exact opposite of what this guy is saying. I'm sure one of his freshman economics' students could teach him a lesson if he or she had the nerve.
Anyway, giving an economics prize to anyone from the University of Chicago (notoriously neoliberal school/monetarist) is a waste of time unless you are trying to establish the irrelevancy of the award.
Read the rest of his article here.
And read a takedown of it by Ramanan, here.
2 comments:
I have a eureka moment here of minute proportions.
The absorption thing ... how does government debt absorb private monies???
Taxation and draining liquidity out of the private real economy.
This is half full or half empty thing.
What they say is true - new gov debt absorbs private real economy holdings-the mechanism however is not clear and not mandatory to have in place.
We do not borrow in yuan rmb
Actually, it's not a Nobel prize, it's a "Nobel" prize: it is a prize "in honour of Alfred (?) Nobel", given out by the Swedish Riksbank (central bank). I notice how people manage to blur the distinction between the economics prize and those for the hard sciences like physics.
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