Nobel laureate Joseph Stiglitz, just arrived in Australia for a lecture tour, is quoted in The Age as lauding our stimulus program as near enough the best in the world:
THE Nobel Prize-winning US economist, Joseph Stiglitz, has described the Rudd government’s stimulus package as ‘one of the most impressive economic policies I’ve seen, ever’, but also expressed disappointment at the concessions granted to mining companies under the new minerals resource rent tax.
I suppose coming from the United States it is easy to get carried away by the results of a stimulus program in an economy that was not actually in all that much bother to begin with. But quite quite extraordinary is that in spite of everything he has so far seen back home he still would like an additional stimulus applied to the US economy.
More evidence that when this GFC is finally over and we have conducted post mortems across the world, that the Keynesian economics upon which such judgements are made will be discarded from our economic texts. It will take time, but there is only so much failure an economic theory can withstand before others begin to work out that something else is needed instead.
Meanwhile, from The Australian:
JULIA Gillard will be confronted by damaging allegations of pork-barrelling following a damning audit report.
The report reveals a key element of the federal government’s stimulus package was skewed in favour of Labor electorates.
The Australian National Audit Office found the government failed to follow its own guidelines for assessing grants when dishing out $550 million from the government’s Regional and Local Community Infrastructure Program.
The report also revealed that the government failed to publish clear criteria about how the projects would be assessed.
I suppose the tour was booked a while ago. I wonder if it was in Gillard’s mind when the election date was decided. Nobody would be surprised at those comments.
pedro
27 Jul 10 at 5:19 pm
I wonder if you are right about final rejection of Keynesian economics, Steve. If so, many careers and reputations will be in ruins. Which makes it unlikely that it will happen – too many have too much at stake.
More likely, I think, is that we we get the “it has never been properly applied” argument.
Ken Nielsen
27 Jul 10 at 5:23 pm
“More likely, I think, is that we we get the “it has never been properly applied” argument.”
You can go the NYT right now and see that very claim about the US.
pedro
27 Jul 10 at 5:29 pm
What does k equal?
.
27 Jul 10 at 6:27 pm
Steve
I don’t really know what the numbers looked like from the outside, but inside business and the commercial world we in Oz had a terrible year in 2009-10. Mand A activity and capitalisation of new asset purchases dried up, all because of Labor’s crappy stimulus plan diverting spending to schoo; halls and imported Chinese manufactures.
Rococo Liberal
27 Jul 10 at 8:46 pm
What does k equal, indeed? k equals one of the biggest problems in modern macro.
If Dr Ken is worth his salt, he should offer his services to the US government to solve their unemployment problems. After all, he’s in the business of designing perfect stimulus packages…
Skuter
27 Jul 10 at 9:48 pm
Here’s good old Joe monstered in a TV interview with hedge fund manager, Hugh Hendry.
http://paul.kedrosky.com/archives/2010/02/hugh_hendry_vs.html
JC
27 Jul 10 at 9:52 pm
Here’s Stiglitz from 7.30 Report tonight, giving an answer that’ll make Labor happy:
KERRY O’BRIEN: There’s been a lot of criticism of waste in the way some of Australia’s stimulus money was spent. Is it inevitable if you’re going to spend a great deal of government money quickly that there will be some waste and can you ever justify wasting taxpayers’ money?
JOSEPH STIGLITZ: If you hadn’t spent the money, there would have been waste. The waste would have been the fact that the economy would have been weak, there would have been a gap between what the economy could have produced and what it actually produced – that’s waste. You would have had high unemployment, you would have had capital assets not fully utilised – that’s waste. So your choice was one form of waste verses another form of waste. And so it’s a judgment of what is the way to minimise the waste. No perfection here. And what your government did was exactly right. So, Australia had the shortest and shallowest of the downturns of the advanced industrial countries. And, ah, your recovery actually preceded the – in some sense, China. So there was a sense in which you can’t just say Australia recovered because of China. Your preventive action, you might say pre-emptive action, prevented the downturn while things got turned around in Asia, and they still have not gotten turned around in Europe and America.
http://www.abc.net.au/7.30/content/2010/s2965891.htm
steve from brisbane
27 Jul 10 at 11:14 pm
yes Steve.
Someone should play that Video I posted to poor old Joe every time he opens his mouth to remind him what it’s like to be made a fool of in front of a large audience for talking shit and religious faith economics.
JC
27 Jul 10 at 11:19 pm
we have had Steve bewailing the fact Asutralia did in fact have a recession and no-one has recognised this and now he is saying we weren’t in much bother at all.
nice to see consistency.
I would have thought classical economics died the death following the colossal failures of Ireland and the Baltic countries to mention but a few countries.
Butterfield, Bloomfeld % Bishop
28 Jul 10 at 9:27 am
Speaking of Keynesian economics, did anyone notice this bit in an Economist blog noting the argument that many Republicans are “de facto Keynesians”?
http://www.economist.com/blogs/democracyinamerica/2010/07/long-term_deficit
steve from brisbane
28 Jul 10 at 9:28 am
keep your hands off the Baltic, Herr Homer.
jtfsoon
28 Jul 10 at 9:29 am
steve from brisbane
everyone in the mainstream of politics is Keynesian including right of centre politicians, it’s an unavoidable fact.
My problem with Keynes isn’t so much the idea that there might not be positive feedback effects from deficit spending when economies are in recession but that they also create distortions and the chances of smooth implementation given lags is so bad *and* the political economy of Keynesianism is so deleterious that as a general rule we are better off not using fiscal policy in such a manner.
jtfsoon
28 Jul 10 at 9:32 am
that is easy Statman as they are the economies no-one dares mention here
Butterfield, Bloomfeld % Bishop
28 Jul 10 at 9:33 am
http://catallaxyfiles.com/2010/07/27/more-on-the-stimulus/comment-page-1/#comment-78574
Stiglitz’s answer above about different forms of waste is a non-answer; no one disputes there being different types of economic waste, the question always is which is more deleterious to the economy. If he can’t quantify the waste for either he is merely asserting but not establishing the efficacy of Keynesian stimulus spending as the least wasteful.
To see the intellectual hole that Stiglitz dug for himself we have this:
No perfection here? but what the government did was exactly right, er, perfect?
dover_beach
28 Jul 10 at 9:51 am
No Snoopy.
A stimulus to work as it brilliantly did here has to be fast to avoid recession.
It was only ‘perfect’ in that it has stopped the economy going into negative growth, even in the last national accounts.
The stimulus is now actually reducing growth as the private sector takes over.
If every country was as successful as Asutralia the world economy would be swimming and budget deficits and debt falling strongly
Butterfield, Bloomfeld % Bishop
28 Jul 10 at 10:02 am
Homer, what are you talking about? How you can think your comment is a response to mine only confirms that you’re an utter fool.
dover_beach
28 Jul 10 at 10:20 am
Mirror mirror,
perfectly understandable you wouldn’t understand either
Butterfield, Bloomfeld % Bishop
28 Jul 10 at 11:01 am
Kevin D. Williamson:
Words I Never Expected To Type: Man, I miss the fiscal discipline of the Bush era!
Wow.
C.L.
28 Jul 10 at 7:07 pm
Mirror mirror,
perfectly understandable you wouldn’t understand either
Here, let me wipe the dribble from your chin, Homer.
dover_beach
28 Jul 10 at 7:10 pm
No Bush left a deficit of well over a trillion dollars, well over 10% of GDP.
wow A defcit of 3% of GDP when the economy humming compared to 10% when the economy tanks
Butterfield, Bloomfeld % Bishop
29 Jul 10 at 12:32 pm