TW: Economist comes out and states of the obvious but rarely spoken . The economists of both left and right do not really know what is going on and more importantly what to do. Therefore in the vacuum they fall back on biases and ideology. I strongly empathize with the sentiment. Anyone stridently calling for one solution or the other is likely an ideologue and probably not particularly well-informed.
Obama is striving for a hybrid spending/investment/tax cut approach. It will pass, it might actually help. Lets hope so.
From the Economist:
"...the thing which has stood out through this roundtable, from Olivier Blanchard's initial piece to the contributions of academics, correspondents, and readers, is the extent to which we're able to discuss the issues involved at an extremely broad and vague level. We don't sound like expert diagnosticians debating which of several potential infections could be causing a patient's trouble. We sound like witch doctors who can't agree on just where in the body the lifeforce can be found. We're not comparing engineering schematics. We're pondering the shape of the earth. Is the issue animal spirits? Do we need a placebo? Are debt concerns most important, or should stimulus be as large as politically possible?
...so many of the crucial debates concerning diagnosis of the crisis, financial treatment, regulatory reform, and economic stimulus have resulted in disputes over rather significant points.
I don't want to excessively diminish the contributions of economists. Thanks to the work of previous generations of economists, we understand the danger of contractionary monetary and fiscal policy in situations such as this, and it's unlikely we'll make the mistakes that produced 25% unemployment in America in the 1930s.
But it remains the case that the economist's great decider—statistical analysis—struggles to parse the significant macroeconomic events of the past two centuries; there just aren't enough great global depressions to know what causes what under what circumstances. And as such, we're left with multiple, variably useful models through which to view the world, and no good way to adjudicate the disputes. Go and read Paul Krugman's blog for the past few weeks. At times, it seems as though he's debating children, like a modern astronomer arguing with an adherent of a Ptolemaic solar system. Go to an outpost from the other side of the debate and, give or take the rhetorical tropes, you see much the same thing.
In the wake of the current economic crisis, scholars will focus on improving their models and attempting to generate a better picture of how the financial system and global economy operate. But there are equally important methodological questions outstanding. Economists need to step back and figure out how to adjudicate questions that can't be solved by turning to standard errors. The experience this time—of dueling op-eds citing papers the relevance of which no one can agree upon—is less than heartening."
http://www.economist.com/blogs/freeexchange/2009/02/blanchard_roundtable_in_conclu.cfm
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