Knowing and Making

A comment from Joshua Corning on this Environmental Economics post says: Also it should be noted that many economists are politically neutral and are simply painted by the left. The idea that there are libertarian, conservative and leftist economists is false dichotomy (trichotomy?). The reality is that there are economists and there are left wing economists, with the left wing economists trying to paint everyone who produces work that conflicts with their ideology as being right wing. This comment is hilarious on its merits - just replace "left" with "right" and vice versa to see an equivalently absurd statement that would be equally happily accepted by a different group of people. But it raises a sort-of valid question: what does it mean to be a left-wing or a right-wing economist? In two conversations recently I've felt the need to make excuses-in-advance for an economist whose work I was recommending, but who is well to the right (in the libertarian sen...

Hal Varian in the WSJ (via Mark Thoma and Marginal Revolution) has touched on a topic I have been thinking about for a while: how is the fiscal stimulus best spent? On consumption or investment? There are essentially two tools available for the stimulus: tax cuts and government spending. And there are five main sources of demand in the economy: private consumption, private investment [optionally divided into business and residential investment], government consumption, government investment and exports. I am not going to address all ten combinations, but focus on private investment - should we promote it, and if so, which are the best tools to do so? I am a priori neutral between tax cuts and spending; tax cuts are good because they let people allocate spending by efficient private choice; spending can be good if it achieves public goods that are not best purchased in the marketplace. My intuition, like Hal's, is that private investment is important. But is there a clear argument...