Justin Wolfers has an interesting snippet in the New York Times:
Recently each of these eminent economists was asked whether the unemployment rate was lower at the end of 2010 than it would have been without the stimulus bill. Of the 44 economists surveyed, 37 responded, yielding a healthy response rate of 84 percent.
Among those who responded, 36 agreed that the stimulus bill had lowered the unemployment rate, while one disagreed. That lone disagreeing economist, Harvard’s Alberto Alesina (who was one of my thesis advisers), has been a virulent opponent of the stimulus, although the research that he’s based this upon has come under sustained criticism, particularly from the International Monetary Fund, which views the study as flawed.
Below is the latest version of the expected unemployment impact of the great recession and the expected impact of the Obama package in unemployment terms. (If anyone has a more recent version please let me know).
So our 36 economists have some explaining to do. Mainstream macro theory made a series of predictions and is summarised in that graph – reality unfolded in a very different way. So now how were they wrong in 2009 and what have they done to improve their approach since then?