Arnold Kling  

Alan Blinder Testifies

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He says,


the days of what I call the "Field of Dreams" strategy--build a bigger GDP, and the jobs will come--should be over. It's a sensible strategy in many contexts, but it has two serious drawbacks in the present situation. First, it is working very slowly because firms are so reluctant to hire. Second, it is expensive--in the neighborhood of $100,000 of government spending or tax cut for each new job saved or created. America needs more jobs now, and because of the large budget deficit, we need them cheaper.

Read the whole thing. Thanks to John Taylor for the pointer.

Of course, I regard Blinder's estimates of the cost of job creation using spending or tax cuts as optimistic. But the news here is that he uses the "Field of Dreams" phrase to disparage the link between spending and employment. Next thing you know, he's going to start talking about PSST.

Blinder also is forthcoming about the doubts raised about his joint work with Mark Zandi on the effects of the TARP and the stimulus. He has to address a wide range of criticisms of macroeconometrics, so he barely touches on the issues that concern me the most. My criticisms are spelled out in my lost history paper.


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COMMENTS (4 to date)
RPLong writes:

Oops! The like to the lost history paper doesn't work. Please fix it - I'd love to read it. :)

[Thanks! We're working on fixing it. --Econlib Ed.]

Vacslav writes:

I found the lost lost history paper here:

http://arnoldkling.com/essays/macroeconometrics.doc

Floccina writes:

Seems like that would be a good argument in favor of replacing the min wage, food stamps, subsidized housing and some other welfare programs with an hourly wage subsidy.

Hyena writes:

I can't help but wonder what role the budget deficit plays in job creation. If you're raising money through bonds to finance job creation, your project is in part self-defeating: you're trading government investment for private investment to some degree by creating new securities which meet the demand to hold cash.

And PSST isn't even in tension with any of this. If it were, there'd be no factories in China which produce iPads by hand because there are no factories in the US which do so. What's sustainable always deals in the prices of inputs and outputs.

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