We Need a New Branch of Economics: Stimulus Economics

February 2nd, 2009 by Al Lewis (alewis)

I put the term “stimulus economics” in my category list last week, covering several postings aimed at getting people to spend more money. In my naivete I thought the field already existed as an academic discipline, but it doesn’t.

It is not macroeconomics, which studies the effect of fiscal and monetary policy.  Stimulus Economics is something altogether different:  the art and science of cost-effectively getting people to spend money in order to revive an economy.

Clearly if we learned anything from the fiasco that was the 2008 Stimulus Check mailing, it’s that we need to know something about how to get people to spend more. It’s not enough just to give them money any more than you can get someone to exercise if you put a treadmill in front of them.

It should be a branch of economics on its own, with its own Journal of Stimulus Economics and its own mission: To understand and maximize the impact of government spending on the economy. It would comprise:

· Behavioral economics – why do people spend the way they do and how can that be changed?

· Macroeconomics—how much should be spent to get the highest multiplier, and how to keep that multiplier inside the US?

· Creative thinking—what specific policies can extend the stimulus impact at no cost, or create a stimulus out of nothing? This is where the Stimulus Gift Card and Instant Tax Refund ideas come in. Both require no government spending.

Examples of the last:

stimulus gift card

saving taxpayers money by eliminating high interest loans at tax time

 

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9 Responses to “We Need a New Branch of Economics: Stimulus Economics”

  1. armchaireconomist Says:

    totally agree. A Nobel prize to the first person who figures out how to overcome the “Paradox of thrift.”

  2. concordjoe Says:

    I am shocked that the most important questions of our day have no academics studying them. Not that academics are always right (far from it) but it seems like if there had been such an animal before 2008 we would have avoided the obviosu fiasco of the 2008 stimulus checks.

    Where is Harvard on this one? MIT?

  3. thoreaufan Says:

    here’s a good example — you have this stimulus idea about more upscale immigration. Would that be a net positive for stimulation or taek away jobs? Who the hell knows but it should be someone’s job to find out.

  4. stimulusopponent Says:

    nothing personal but this site should NOT come up first or second on google when you plug in “stimulus economics.” That by itself shows this field is understudied. Like in the liberals stimulkus plan no one knows HOW LONG its going to take to get the stimulus into the economy. who is studying that?

  5. foxnewsfan Says:

    I came here from Kruse about the pennies — I thought this would be a conservative site. I don’t like liberals and I don’t think I would like you. I think if people knew how much of the stimulus was going to be wasted they would oppose it but no one has ever studied this stuff. no one had even heard the term until last year. I fear Harvard is going to end up doing this first which would be a travesty but at least would encourage others to counter-study it.

  6. queerguyforthequeerguy Says:

    fox news guy, liberals are in control now–get used to it. But you do have a point. No one knows if this is going to work. It’s a $800-billon bet. we don’t know how much will stay in the country, how much will be wasted. I personally think a lot of it will be but it’s almost impossible for the government to do anyhting without some of it being wasted.

  7. policywonk Says:

    It’s like with birds, where they tag them to see how they migrate. Stimulus economics would partly be about seeing how the money flows when it is spent in various ways.

  8. Charles Beall Says:

    At last, I’ve found someone who actually knows how to use the word “comprise.”

  9. mindyk Says:

    a PERFECT example is my comment on the “informationalism” proposal. Stimulus Economics would also study the effect of domestic content disclosure on spending patterns

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