Fiscal Policy
| Learning Objectives: Assess the efficacy of fiscal stimulus and aggregate demand management. |
| Lecture handout: Fiscal policy* |
Keynesian approaches to aggregate demand management became popular because they were seen to have explained the problem of the Great Depression. My video on the Great Depression explores some of the history, and also have a video looking at The Financial Crisis of 2008-09. The big debate between Keynesian and Hayekian economics was popularised by Russ Roberts and John Papola in the rap battles Fear the Boom and Bust and Fight of the Century.
For some documentaries on the Obama stimulus, see:
- Video: Part 1: The First 100 Days of “Inside Obama’s White House” BBC2 (iPlayer)
- Video: Hank Paulson: What I Could Have Done Differently (US Netflix)
Here’s the official website of the Williamson Tunnels and for more on Chinese “ghost towns” you can watch China’s Empty City, or read this short World Bank blog post on the Rise of the Chinese Ghost Town. The photo of manual labourers in North Korea scrubbing the road comes from this article, and my grad school buddy Curtis Melvin created North Korea Economy Watch. Despite what I say in the lecture… not all dog rescues are disasters….
Some podcast episodes that I particularly recommend:
- Audio: “Donald Kohn on Fed policy from the 1970s to today” Macro Musings (from 33:00 – 43:08)
- Audio: “Robert Hall on Recession, Stagnation, and Monetary Policy” Econ Talk (from 0:00-7:19
- Explain what Hall means by “automatic stabilisers” See MfM
- What does Hall claim is the main reason for the discretionary fiscal policy of 2009 to have had a weak impact? States spent the money
- Does Hall believe that the US economy had a fiscal stimulus in 2009? No – he claims that since the government as a whole didn’t increase spending it wasn’t a stimulus.
- Audio: “Robert Hall on Recession, Stagnation, and Monetary Policy” Econ Talk (from 49:51-56:23)
- What’s the conventional definition of a recession?
- How does the NBER officially define recessions?
The content on policymakers feeling pressurized to “do something” is an element of crisis management more generally. An interesting example of the types of trade off that policymakers face is BBC Radio 4’s ‘Discussion Time: Coronovirus‘. Even though it relates to an epidemiology situation, it is relevent for any PR situation. Policymakers face a balance between maintaining public confidence, being seen to be providing a quick and clear response, without inciting a general panic. This relies on having good frameworks and tools that relate to the specific situation (the Radio 4 panel explain how important expert forecasts of the spread of foot and mouth disease were, in a recession economic impact studies play a critical role); but also an ability to manage public expectations. The goal of successful crisis management is to balance these things without introducing new uncertainties.
Finally, my video on Macro Policy summarises policy makers options. [Macro Policy flashcard]
| These resources form part of my Managerial Economics course map. You can watch the full YouTube playlist here. This page ties into Chapter 9 (Section 9.2, 9.3 and 9.4) of ‘Markets for Managers’. |