Tuesday, January 10, 2012

Economists inventing nonsense

Both make the same simple error. If you spend X at time t to build a bridge, aggregate demand increases by X at time t. If you raise taxes by X at time t, consumers will smooth this effect over time, so their spending at time t will fall by much less than X. Put the two together and aggregate demand rises.SIMON WREN-LEWIS
Is the smoothing over time this fellow misses. We smooth over time by foregoing other investments that would have created demand. This fellow falls for the Broken Window fallacy.

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