Becker and Murphy on the Stimulus Package


Gary Becker
and Kevin Murphy write today in The Wall Street Journal about their concerns regarding the stimulus package.

There are no two economists in the world who I respect more than Becker and Murphy. Whatever your political bent, when these two write something, you should think hard about their arguments.

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  1. Blue Sun says:

    Becker and Murphy are both products of the Chicago School and are scholars at the conservative Hoover Institution. They reflect much of the Milton Friedman view of economic theory – which ends up in chaos and collapse every time it is actually tried (the Great Depression, the Bush Administration, the disastrously collapsed “Iceland Miracle,” the South American invasion of “Chicago Boys,” Latvia, Estonia, Ireland, etc.).

    The ability of any economist to continue to have faith that there is such a thing as a “free” market in any 21st Century economy, and that we can create a true laissez-faire, unregulated, self-optimizing, self-disciplining, self-correcting free market (where all participants have at least something approaching equal knowledge and information) is an example of thinking as profoundly naive as those who still believe that Communism can produce a perfect Workers’ Paradise if only the Capitalist countries would stop undermining it.

    But, then, Professor Levitt is also a professor at the University of Chicago, so maybe its no surprise. He apparently also lives in that wonderfully comforting little bubble of alternate economic reality on the other side of Alice’s Looking Glass.

    They say an Economist is one who can explain to you tomorrow why what he predicted yesterday didn’t happen today. The Chicago School boys are the perfect paradigm of this.

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  2. Leonard Charlap says:

    Gosh, these guys are supposed to be so great and one a Nobelist, but they seem so vague. They provide very little evidence for their opinions and no historical ayalysis. Is this really the best we can do? As a mathematician, I do not find their comments helpful.

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  3. dave says:

    Nobel prize notwithstanding, comments from conservatives are only palatable if they admit the conservatives (bush 2 and pub congress) got the U.S. into this mess among others: iraq, katrina, etc.

    Further, if these guys are so smart, why don’t they try to influence the government, rather than merely criticising (and at such an early time makes little sense.)

    Few reasons are given for their negative outlying conclusions, and likely no one can know what they will be.

    But, this is history: the worst economic times for the U.S. have followed or coincided with pub presidents: hoover, reagan, bush 1 and 2. Of course, conservatives give us poor gov’t because they don’t believe in it.

    But, realists (such as stock market investors) know that the market has grown much better with Democrats in the W.H. than with pubs.

    Why? Competence, think Clinton, Johnson, FDR, etc.

    Ivory towers such as U. Chi. and Hoover inst. seldom produce thinkers with the cajones to take on the real world.

    Dave

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  4. Freeman says:

    Two great economists that do a fabulous job of outlining the major issues and expressing cogent opinions. I work for a municipal government, and we have been delaying bond sales to support capital spending on infrastructure. At last count, we have over $100 million dollars in delayed projects (we are a large city). For example, from an original $25 million planned for road resurfacing in 2009, we have scaled back our capital budget to just over $11 million. The reduction is caused by slower (much slower) revenue growth than anticipated, which means we do not have sufficient funds to take on additional debt through the sale of municipal bonds. Federal assistance would allow us to immediately spend money on projects that are now delayed. In other words, the $100 million dollars was already planned over a year ago (so is “shovel ready”) and is only being delayed now. Without this spending, a lot of construction contractors will need to lay off workers. Does the Becker/Murphy argument take into account jobs that are saved (admittedly in the short run) even if spending will not actually create new jobs?

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  5. Swashbuckler says:

    As already noted by Mr. Charlap, they were incredibly vague. It’s hard to accept what they say without any of the reasoning behind their conclusions. I don’t know that I have the knowledge to understand their reasoning, but I don’t find this at all convincing.

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  6. Colin says:

    Blue Sun — Please take a history class before spouting such nonsense. The Great Depression was an example of neoliberal policies run amok? Please. Hoover passed a massive tariff bill and even FDR criticized him for excessive tax and spend:

    http://en.wikipedia.org/wiki/Herbert_Hoover#Economy

    And the Bush Administration? LOL. The same guys that consistently engaged in deficit spending, expansion of federal involvement in health care, education and energy — NCLB, 2005 energy bill, Medicaid drug bill — are guilty of being Friedman acolytes? Oh, and Sarbanes-Oxley, yet another classic case of their deregulatory tendencies I imagine.

    Meanwhile in South America Chile has outperformed most of its neighbors for some time owing to its liberalization of its economy.

    You also submit Estonia, Iceland and Ireland as evidence, but leave out the inconvenient fact that ALL European countries have suffered. Spain — with socialist Zapatero at the helm — has unemployment of over 13%.

    Just think about this: Bush engaged in deficit spending and promoted more government control. Obama wants to do the same, except with deficits on steroids and even more federal control. Now either Bush is a genius that deserves to be emulated or Obama is an idiot for following in his footsteps. Choose one.

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  7. abelian jeff says:

    The hubris of the previous 3 posters is startling.

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  8. Usually Named says:

    Do you all really think we have market-based and laissez-faire here in the US? What we have here is a result of ill-thoughtout government intervention over the many years that have caused market distortion and dislocation. To blame deregulation is ridiculous.

    By the way Dave, your statements are so ill-informed, it’s not even worth discussing.

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