Over Fifty Australian Economists Agree Fiscal Stimulus Prevented A Major Recession
Nobel Laureate Professor Joseph Stiglitz has stated publicly that the Australian Fiscal Stimulus was a well designed package that saved the Australian economy from a major recession that has hit almost all the other OECD economies. He argued that the Australian package was a model for other economies facing similar problems.
The attached letter was signed by over fifty academic economists. Several other academics and economists supported this view about the Fiscal Stimulus Package that prevented the Australian economy from a deep recession and prevented a massive increase in unemployment.
The Australian economy has come out of the Global Financial Crisis in surprisingly good shape thanks to this Stimulus Package.
The Australian unemployment rate is amongst the lowest of any of the OECD economies.
Unlike the US and Europe, we are not facing the possibility of a double dip recession.
The current level of government debt (the lowest in the OECD economies) is due to tax revenues falling during a slow-down in the economy, whilst social security payments increase. Most of the increase in the debt would have happened independently of the increased government expenditures associated with the Stimulus Package.
The Stimulus Package has led to an increase in infrastructure investment that would help the long-term development of the Australian Economy.
John Quiggin 
I think you’re missing the point. Claiming that they really know what they are talking about and that therefore their letter should carry weight – that’s not disproving it’s an argument from authority, that’s just what an argument from authority is. I would only ever accept something like that provisionally, for lack of time and other resources to establish the matter more soundly, but I would never accept it as definitive proof unless and until it was backed up like that.
@P.M.Lawrence
To Chris,
I only have one objection to this letter – the comment on the unemployment rate. It does ignore the much higher youth unemployment rate – so its not looking at demographic breakdown. Al is not well in the land of our youth. The unemployment rate for 15 to 19 year olds is horrendous at 16%. I have grave concerns that both sides are ignoring the burden youth currently carries with much higher tertiary education costs than any in the 1980s and 1970s carried, giving them a debt burden in their youth on graduation (when they should be free to be entrepreneurial – they dont need debt induced risk aversion – add to that the need to save for a high housing price and I feel we may be locking out an enire generation from true self sustainability).
In addition the unemployment figures for youth are a blatant fudge. They cant get unemployment benefits unless they sign up to training. Doing so takes them right out of the unemployment figures.
So how high really is youth unemployment?
On another unemployment fudge…how high is the rate of casualisation and contract workers? The morlocks of the labour force still not counted as unemployed but living on one or two casual gigs a week.
Dont forget also those people genuinely unemployed who have to run through all their savings until they only have $3000 left. Until they run down to this level they arent in the unemployment numbers either. It wasnt always this way but we seemed to become obsessed with treating the unemployed harshly and ignoring the myriad of ways the rich avoid tax. Is that Labors fault? Somehow I think we can go straight back to the prior Coalition for these harsh attitudes.
Yes welfare cheats are irksome… but relative to wealthy tax cheats using tax havens in absolute dollar terms I will bet here welfare cheats are a drop in the ocean. Most people simply dont realise that.
Unemployment is a number no one can trust. How did this happen in Australia?
PM Lawrence, academics like Frank Stilwell are stalwarts and well known for their economic thoughts. What Australia needs is a live public debate between the various economic schools of thought on the above topic rather than politicians just rambling on. Maybe that will clear the air a bit.
Anyway – for what its worth (its weight it gold for telling the truth)….
this letter is all over the internet and the papers are now scrambling to catch up. So they werent ignoring it. They were only hoping to ignore it…in favour of a 14 year old boy singing wonder from Hollywood or maybe Angelina Jolies latest domestic with Brad. That sort of news is really cheap when its downloaded digitally.
Its clear if you want real news you have to go to the internet. It seems Murdochs newpapermen dont get out of bed early enough these days to actually get the news fast enough (plus the paper is shrinking – badly – with reworded re runs like fox news). Maybe they need to hire some internet blog reader info miners to stay on top of their game?
All those paper editors and journos out there must be worried about how long they will have their jobs. Gee and I thought they missed it. No – just slow.
Business Latteline reports the Reserve Bank gave labor an “unexpected”(not verbatim)bonus with predictions of a healthy future for the economy. Meanwhile, small business says it wants Emerson in cabinet, but you wonder if this would not bring those in government who are more corporatist into conflict with someone who could represent small business quite effectively in cabinet.
“Over Fifty Australian Economists Agree Fiscal Stimulus Prevented A Major Recession”
Whoopdee do, it would be easy to find another 50 who don’t, no one takes economists seriously any way.
@Tony G
So Tony G – you dont accept the expert economists views, and you dont accept the expert scientists views on global warming, and you dont accept the expert Reserve banks view on the soundness of labor’s policies.
Thank god you are not running for politics. You would need to surround yourself with idiots for advice.
A couple of questions for the author.
First, are all the signed economists macroeconomists or strong in macroeconomics and policy?
Second, was the letter based on empirical findings, faith or just ideology?
@Alice
an argument from authority.
do you accept the views of expert economists on the general merits of the market economy?
if the expert economists thought that global warming was a minor economic problem, or that wealth redistribution was counter-productice, would you demand that others join you in accepting their consensus expert views?
do you agree with prof. quiggins post of the other day saying that the last 30 years of macroconomics being a bit of a dead-end or something like that. that argument requires a rejection of a professional consensus.
@Jim Rose
Jim Rose
Yes. Yes. Re the last question. Its the “lets leave everything to the markets economists” that have dominated economic policy over the last thirty / or forty years in both universities and in the corridors of power. Its laissez faire economists who have always been the enemy of sound economic policy JR…even before and during the great depression. There are and always have been two schools of thought. You ignore that. Economics can be employed to serve the powerful or it can be employed to serve the welfare of the majority.
I know which I prefer. The former which should righfully be called “glutton economics” has been dressed up and sold as “lamb economics” and it is not fit for human consumption.
Its the illegitimate offspring of Milton Friedman, Fama and their followers like Greenspan who have now been proved wrong. They did not moderate and cure the business cycle as they claimed. They basked in delusions of grandeur whilst building the greatest financial mess the world has seen since the great depression and it is not over yet. TheUS economy has been brought to its knees by it. It is not the neo Keynesians who are right.
It is Keynes who was always right JR….but you keep following your false gods if you prefer. Time will prove all false ideologies wrong.
@Jim Rose
Oh and as we speak JR – there is talk of higher taxes on the very rich. You had better get used to the idea.
http://curiouscapitalist.blogs.time.com/2010/08/10/time-for-super-taxes-for-the-super-rich/?xid=rss-topstories
@Alice
Another left-wing conspiracy theory and security blanket to help you sleep!
Friedman was a wild man in the wings until the collapse of the Keynesian macroeconomics in the 1970s because of empirical failure on a grand scale. New Keynesian economics is a face saving rebranding of the monetarist economics of Friedman in the 1950s to the 1970s. Brad Delong wrote a nice survey about in 1997 titled “The triumph on monetarism?”
As previously posted, the social democratic bias of the economics profession has been well documented with surveys dating back to 1970s, and most recently using voter registration data in the USA. Even business schools have more democrats than republicans.
The key papers and references are at http://econfaculty.gmu.edu/klein/ and click on academic policy views survey and academic voter registration survey.
The studies date back Seymour Martin Lipset and his collaborators from 1972. They found the U.S. social sciences and humanities to be preponderantly Democratic Party in alignment.
One recent study found the Democratic to Republican ratios were as follows: Economics 3.7 to 1; History 4.1 to 1; Political Science 4.8 to 1; Sociology 47.0 to 1!!
@Jim Rose
JR – you should be addressing your diatribes to the GOP in congress in the US. You might get invited to a cocktail party. Even Greenspan is saying the taxes on the rich need to go up. The US is going into debt to support the rich – now there is a real paradox in that….
US Conservatives dont like debt but they dont mind it as long as the top 2% are looked after at the expense of the bottom 98%. ??
With policies like this from conservatives (keep the massive tax cuts Bush handed out to the rich while opposing government spending and unemployment benefits and health care and education spending etc etc)…the only economy they are helping is the Swiss economy.
As for raising “the left wing bias of the economics profession”. Spare us this nonsense JR.
It was a mantra of the prior coalition government but you forgot to mention “the left wing bias” of charities, of the arts industry, of the public sector employees,….in fact come to think of it…”the left wing bias” of anyone who didnt agree with the prior Coalition government (of which Abbott was at the forefront in the rants).
You are more than a bit out of date JR. Howard is gone. The people in the end did not like him and he will not be recalled fondly precisely because of the “rich right wing bias” the Coalition and people like you display.
Time to moderate your rants JR. Even Tony Abbott is trying to hide the sarcasm and the put downs now.
@Jim Rose
Re yr comment “One recent study found the Democratic to Republican ratios were as follows: Economics 3.7 to 1; History 4.1 to 1; Political Science 4.8 to 1; Sociology 47.0 to 1!!”
Are you suggesting democrats are better educated than conservative politicians JR? That is probably correct.
Im glad some politicians actually do study economics, history and the behaviour of people before they decide on a career in politics.
@P.M.Lawrence
(Unfortunately) most people don’t understand economics, and never will, so they are reliant on the considered opinions of experts. In the face of uninformed comment – and active disinformation – it is desirable that experts are willing to make definitive statements on matters of importance and this should be applauded.
The open letter isn’t an argument from authority, because it isn’t an argument at all, it’s a statement. It doesn’t look like an argument and it doesn’t attempt to justify it’s claims. If you are able to personally determine the veracity of the statement for yourself, well and good, but for most people this is just not an option, they rely on the expertise of economists, just like they rely on car mechanics, heart surgeons and aircraft designers.
“The attached letter was signed by over fifty academic economists. Several other academics and economists supported this view ”
So some supported (some part or all?) but didn’t sign? How many who received a request to sign didn’t do either? How many requests were sent?
Is this statement comparable to the IPCC in terms of consensus, or to the Oregon Petition? Or somewhere in between?
@Jarrah
No, it’s not. The IPCC summarises the consensus position of the world’s leading working and theoretical scientists with expertise in fields capable of generating inferences about climate and its etiology. It is the combination of applied and theoretical work iterated over the years since the UNFCCC first arose, with each report building upon and updating the corpus of knowledge through the integration of peer-revewed publication. It is almost certainly the most robust, comprehensive and carefully scrutinised corpus of work in human history.
Good grief. The Cave Hollows (OISM) fraud, produced by a bunch of religious nutters involved simply assembling lists of people who apprently had some sort of certificate level “scientific” qualification from bodies who in part had paid OISM to accredit them. many of the people were unaware that their name was on the petition, some had died, some didn’t exist and it was even possible to add one’s name via the Internet. It was published at a time when insight into climate change matters was still being refined.
This letter, as far as we can tell, refers exclusively to people who have standing to comment, and know their names are on it. It does not have the standing of published work in macro-economics, but the underlying principles are not at issue.
They could of course, be wrong, but then, the question would arise — whom should one turn to if not the economists to design fiscal policy? If one prefers dissenting economists, on what basis should one choose the view of dissenters? If the dissenters’ policy were implemented and the results were poor, who should take responsibility for the failure? If the dissenting economists persisted — alleging that the failure of policy was attibutable to unforeseen factors not going to the heart of the paradigm they espoused, on what basis could one entertain their view, if not that of the consensus?
In short, unless there are compelling reasons to reject the consensus view or accepting the dissenter’s view would entail no elevation of risk to legitimate interests, is not rejecting the consensus reckless?
This is not really an argument about absolute truth (for absolute truth one needs religion), but one about the basis on which can create policy, accepting as one must that every policy choice is a kind of risk trade. And if one is going to decide on risk, unless one is onesself an expert and bearing most of the responsibility personally, should one not follow the advice of those best equipped to declare on the matter?
Fran, I’m trying to establish if there is a consensus, and if so, how strong it is.
@Tony G
Only 50 signatures – logically speaking, how many were asked and refused to sign?
@Alice
No. progessives gravitate to sinecures at universities rather than real jobs.
@Jarrah
@Jim Rose
So academic research isnt a real job Jim Rose? Oh dear. What can I say? There are plenty of charlatans who I would trust a lot less working in what you might call a real job.
What is your definition of a real job Jim Rose? Did Einstein have a real enough job for you? How about Louis Pasteur and…and …and etc you and I both know the list of academic contributors to research and to the advancement mankind could stretch beyond the word limits of this blog.
You do have a weird definition of what constitutes a real job dont you?
Fran, they just won’t read the posts, will they?
It was explained early that the majority of signatures came from NSW with some from QLD.
One can only guess at how many other high profile economists could have added their signatures, had time been less pressing, this side of an election, where facts need to be put before the people, some times hurriedly.
The criticisms come from people who would probably applaud Abbott’s arrogant refusal of costings for the nonsenses he has tried to pass off as “policy”, until after the deadline and with not enough time for the appropriate people to scrutinise them, prior to the day.
What Alice said.
What a silly dismissal of the genuinely hard work that comes of using the mind rather than just the body . I worked harder in a day, at humble undergrad level, than I ever worked physically in a decade in factories and gangs and I am not one averse to doing hard physical work.
Ron Bird had a bit to say. Steve Keen replies, cogently.
@Jim Rose
“No. progessives gravitate to sinecures at universities rather than real jobs.”
… whence they visited the GFC upon an unsuspecting real world.
Looks like Keen doesn’t take kindly to “rougher than usual treatment”, a pretty rational response, I’d think!
No, I think an Abbott government would not give working people a thousand bucks and more to sort themselves out with, and it would be an appropriationist government of the flavour of bloody-minded Cameron in Britain.
@Alphonse
correct.
progessive intellectuals provide the academic propaganda for the government failures that started, deepened and prolonged the global economic crisis. these government failures ranged from several years of looser monetary policies, government guarantees and the too big to fail mantra.
A test: I wonder how many signatories of the open letter would disagree with this passage from Keynes’ general theory on how to reduce unemployment in a recession:
“If the Treasury were to fill old bottles with banknotes, bury them at suitable
depths in disused coal mines which are then filled up to the surface with
town rubbish, and leave it to private enterprise [to dig them up again] …
there need be no more unemployment and … the real income of the
community, and its capital wealth also, would probably become a great deal
greater than it actually is.”
Put the rest of Keynes quote in JR…..or I will do it for you
“It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing. ”
Indeed it would.
@Jim Rose
Oh and JR – maybe you should read some Krugman as well
“Hate to say this, but he’s (George W Bush) right when he says
I think actually the spending in the war might help with jobs…because we’re buying equipment, and people are working. I think this economy is down because we built too many houses and the economy’s adjusting.
In fact, I’d say that the sources of the economy’s expansion from 2003 to 2007 were, in order, the housing bubble, the war, and — very much in third place — tax cuts.
Of course, we could have gotten just as much or more stimulus by spending $10 billion a month on actually useful stuff– think how much domestic infrastructure could have been built or repaired for the cost of this miserable war.
But the war was what we got.”
Give me digging up old bottles filled with banknotes anyday….. than another miserable conservative led war like Iraq.
@Alice
be careful for what you wish for.
A considerable amount of defence spending is founded on dual use R&D and learning by doing. radar and jet engines might be an example. still no justification for war mongering.
JR says “A considerable amount of defence spending is founded on dual use R&D and learning by doing.”
I dont know if you saw the ramifications of what depleted uranium has done to Falujah JR…far worse what its doing by way of child deformities and leukaemia rates so before you praise war R n D – some of the R n D just plain outright ugly.
@Alice
a good example of a dual use technology: nuclear energy.
good example of rent-seeking too. nuclear power stations shelter behind regulatory caps on tory liability.
Jim
Keynes idea about burying bank notes in bottles was and still is an interesting idea. Central bank money creation activities have proven to be extremely inefficient in increasing the money supply while the banking system is in a dysfunctional state.
It would certainly be a much better means of increasing the money supply than dropping money from helicopters.
A question for you. Do you think a gold rush in the US would be a good or bad thing for the US economy. If the answer is the former than what is the difference between mining banknotes and mining gold in terms of increasing the money supply?
@sdfc
thanks.
On the relative merits of fiscal and monetary policy tools, Robert Lucas explained his support for 2008 U.S. monetary policy actions in an op-ed on December 2008 as follows:
• There are many ways to stimulate spending, but monetary policy was the most helpful counter-recession action because it was fast and flexible.
• There is no other way that so much cash could have been put into the system as fast, and if necessary it can be taken out just as quickly.
• The cash comes in the form of loans. There is no new government enterprises, no government equity positions in private enterprises, no price fixing or other controls on the operation of individual businesses, and no government role in the allocation of capital across different activities. These were important virtues.
@sdfc
As to your question, the resource cost of paper money versus commodity money has spawned a large literature.
The costs of discovering and mining gold puts an upper limit on monetary growth, led to long deflations at the end of the 19th century, and also periods of inflation when there were major ore discoveries and technological improvements in gold extraction.
Earlier discussions took it for granted that the real resource cost of producing irredeemable paper money was negligible – the cost of paper and printing.
Experience under irredeemable paper money standards makes it clear that such an assumption, while it may be correct with respect to the direct cost to the government of issuing fiat money, is false for the welfare costs to society as a whole.
Uncertainty over future monetary policy and associated inflationary biases always tended to persist under government control of paper money. During inflationary times, people tie up real resources that could have been applied for productive activities in hedges against rising prices and searching out investment strategies. Success with Inflation targeting has greatly increased the advantages of paper money.
Some countries such as Hong Kong and a few other places currently, many places in their colonial days, and arguable Australia from 1920 to 1924 used a currency board to harvest locally the revenue from money creation.
Typically, currency boards have advantages for small, open economies which would find independent monetary policy difficult to sustain. They can also form a credible commitment to low inflation. A traditional criticism of currency boards is that they impart a deflationary bias to growing economies.
@Alice
On “Did Einstein have a real enough job for you?” he was working at the Swiss patent office when he wrote his three great papers in the summer of 1905.
More generally, all the examples you gave were not social scientists. Is there a progressive or left-wing approach to physics, chemistry, biology and so on?
Jim
Monetary policy in normal times is effective with of course the famous long and variable lags.
The problem with this episode is that banking sector money creation activities have been severely inhibited. That monetary policy in the US has lost much of its effectiveness is evidenced by the sustained decline in private sector credit. The cash you talk about is largely sitting as bank reserves at the Fed. Fed action to pump money into the banking system has however gone a long way to preventing a complete financial meltdown.
That the US fiscal policy has been effective in helping prevent a worse downturn is pretty much beyond doubt. Forming opinions on government intervention based on general equilibrium models in the absence of financial sector instability is bound to lead to incorrect conclusions. The major part of the US fiscal problems stems from running consistent budget deficits for the best part of 50 years.
Lucas and his ilk are ideological warriors who have commited much of their careers to the premise that fiscal policy is ineffective. To admit that it has been effective would be to trash much of their life’s work, so pardon me if I put little stock in their opinions.
@Jim Rose
I think the point being completely missed here is that someone gets paid to dig….its not whats in the bottles that really matters except that it has sufficient value for persons to be employed…like the fiscal stimulus.
@sdfc
thanks
If there is a liquidity trap, as you hint, Auerbach and Obstfeld explored this recently in the American Economic Review in “The Case for Open-Market Purchases in a Liquidity Trap”.
To the extent that long-term interest rates are positive now or short-term interest rates are expected to be positive in the future, trading money for interest-bearing public debt through open market operations reduces future debt-service requirements.
A massive monetary expansion during a liquidity trap should improve welfare by reducing the taxes required in the future to service the now much smaller national debt!!!!
A quantitative easing during a liquidity trap is, in effect, as good as or even better than a lump sum tax. Central banks perhaps should contrive liquidity traps because they can then buy back the public debt because of the unlimited demand for money. People will without limit give up bonds for non-interest bearing cash. If monetary policy is impotent near the zero bound, the Fed should buy trillions of dollars worth in federal bonds and payoff the public debt. This is a logical implication of liquidity traps for an optimal fiscal policy!!!!
Rhetorical claims that fiscal policy worked is the usual shape shifting.
1. In Australia, it worked because unemployment rates are back near the natural rate.
2. In the USA, the situation would have been far worse but for fiscal policy.
The perfect hypothesis – it is confirmed works not matter if things improve or worsen.
After reading the annual reports of the Fed in the 1920s and 1930s, Milton Friedman noticed the following pattern:
“In the years of prosperity, monetary policy is a potent weapon, the skilful handling of which deserves the credit for the favourable course of events; in years of adversity, other forces are the important sources of economic change, monetary policy had little leeway, and only the skilful handling of the exceedingly limited powers available prevented conditions from being even worse”
two questions: are fiscal expansions potent in small open economies? what is the extent of exchange rate crowding out?
I also draw your attention to the literature on expansionary fiscal contractions. Examples in addition to the EU in 1980s and 1990s are Australia and NZ in 1931. 25%+ unemployment in 1931 was below double figures by about 1935 after massive fiscal contractions combined with going off the gold standard.
By default, there is, since the political right is now explicitly anti-science, particularly in the US, but also among their Oz offshoots (eg Miranda Devine). Scientists return the favor, BTW. In the US, they are almost as uniformly hostile to the Republican party as are blacks.
I was just watching Virginia Trioli this morning interviewing a Coalition mouthpiece (who’s name escapes me because they all sound so similar).
Virginia ” so you say you want to be back in surplus by 2013? Now assuming you get your surplus what are your big visions for this country?”
Translate as…what will you spend the surplus on?
Coalition response “well we believe its up to the individual to make decisions on what they want for the future”
Translate as – “we are not going to spend the surplus on anything big for the country (except elections and vote buying of marginal seats and our own superannuation and perks and tax cuts for our wealthy mates) – we have no big vision – governments shouldnt have big visions – if you individuals (riff raff) down there on the street want a big vision – pay for it (again) yourselves. Pay taxes to us to be as lazy as all get out, then pay user pays prices to use the infrastructure we should have been building all along”
No Harbour Bridge. No Snowy Mountains Scheme. No big vision transport initiatives and no vote from me.
Useless as the old ocker saying goes…..
Alice, one reason the Coalition cannot get its act together is that Abbott has lost one trillion dollars.
@jquiggin
thanks.
So the environmental movement is pro-science. That is:
• It has always desired to base its conclusions on the best available science?
• Is always willing to engage in deliberation and compromise to balance environmental protection with other compelling social and economic objectives? and
• Has always had a willingness to consider alterative regulatory strategies that deliver the policy objective at the lowest cost?
Progressives respect the rights all to disagree, and progressives never resort to name calling and never to personal attacks to dampen dissent and chill free debate?
Progressives have an overwhelming commitment to persuasion based on facts, reasoned arguments and anticipated consequences, and welcome debate and disagreement out of the truth that the growth of knowledge comes from repeated challenge and from a minority persuading the majority that its views are mistaken or are incomplete?
Progressives accept that scientific inquiry assumes that reality is objective and consistent, that we have the capacity to perceive reality accurately, that rational explanations exist for the world around us, and that all scientists can contribute to science and the search for knowledge regardless of race, nationality, class, culture, or gender?
Progressives reject the notions:
• that the results of scientific findings do represent any underlying reality, but are the ideology of dominant groups within society? and
• that science is a belief system that is deeply conservative and conformist, that resists change? This includes the views that science has a bourgeois and/or Eurocentric and/or masculinist world-view.
Congratulations, Prof. Quiggin!
You have succeeded where the rest of us have failed.
On the first paragraph of Jim Roses reply, that is.
Need I read the rest?
@paul walter
1st para should be “So the environmental movement is pro-science?”
@jquiggin
American faculty, especially in the social sciences and humanities, are overwhelmingly Democratic in affiliation and social-democratic in orientation.
If ideology plays no role at all in the hard and applied sciences, what are we to make of the 2.5:1 Democratic:Republican ratio in engineering, the 4.1:1 in chemistry, 4.2:1 ratio in physics, 10.7:1 in biology, or the 13.1:1 in neurosciences?
for more on voter-registration, see Faculty Partisan Affiliations in All Disciplines: A Voter-Registration Study by Christopher F. Cardiff and Daniel B. Klein, Critical Review at http://www.criticalreview.com/2004/pdfs/cardiff_klein.pdf
According to Schumpeter, intellectuals are unhappy with capitalism because they are not important players in a decentralised free-market system.
Hayek argues that intellectuals have a professional distaste for what they cannot explain through explicit reasoning. The market process is hard to explain because prices do not come with explanations attached for all the changes summarised across millions of people that the price movement is sumarising and signaling.
@sdfc
on “Lucas and his ilk are ideological warriors ” Robert Lucas supported Obama.
Team obama had other Chicago boys – James Heckman.
[delete prior in mod’n]
@Alice
Though it is interesting to speculate on what would happen if one of those diggers were injured or killed in a tunnelling cave in. I suspect the politics of that would have been a lot worse than with the insulation scheme.
This is the basic problem here. Almost all human activity entails at least some risk. We humans know and accept this and respond by trying to engage in informed and rational trading of risk and benefit. The insulation scheme, rolled out at the speed that it was with the fairly loose compliance needed to roll this out at the speed wanted, invited a risk of harm that a rigorously controlled pahsed conversion scheme would not have. This latter approach would have got more insulation into rooves with much less rorting, but it is certain that instead of a million installations, we’d have had perhaps 10-12,000, and each of these would probably have cost more to do. Far fewer people would have had jobs.
Aware of the Keynesian example, as an intellectual exercise, I tried imagining a scheme that would employ people with almost no risk of injury but which yielded a perceived public good for those likely to be under-employed. After some time, I gave up. I began thinking of exercise programs in which people rode fixed bicycles or did lap-swimming which would be a public health benefit but the first obese person who collapses and dies for any reason kills the program.
In the end, cash splashes are probably as safe as it gets, merely because if someone uses their money to kill themselves drinking or going into gambling debt, it’s harder to blame the government. As a trade-off, I imagined giving out smart-cards to buy “healthy” food at supermarkets or quality shoes or to pay for health expenses or home or car repairs but this would have had had very little employment impact.