The Senate Site: Stimulating food for thought: Is all spending created equal?

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Saturday, April 25, 2009

Stimulating food for thought: Is all spending created equal?

Good food for thought. This thought from Mario Rizzo comes by way of Royce Van Tassell's Facebook page.

Is all spending created equal?

. . . when DeLong, among others, says that government spending is as good as private in restoring employment, he is speaking against the whole thrust of the principle of efficient resource allocation.

Another excerpt:

. . . When government adds to investment as a result of fiscal stimulus or directed monetary expansion (like buying mortgage-backed securities, student loans, etc) it does not act as a super-entrepreneur who is trying to determine the efficient and sustainable direction of resources, including the allocation of capital goods. It spends according to economically irrelevant criteria of job creation, propping up over-expanded sectors, and preventing politically painful adjustments.

Rizzo's original is worth a read.

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