Tufte’s Short Post # 10: The multiplier is small

The multiplier is small. Inside the White House, they were using 1.53 as their estimate of the multiplier. This puts their own estimate of the effect of their $800B package at no more than $1,200B. Arguably, that’s smaller than the dropoff we actually had before the package was put into effect. This is the support for the position of Krugman or Bernstein that the stimulus was too small. If you’re a believer, they have a point.

There’s an arthouse film called Thirty-Two Short Films About Glenn Gould. You’re getting Twenty-Six Short Posts from Dr. Tufte. :) These are on why it’s difficult to understand the current macroeconomic situation. Joe Baker is not a macroeconomist, but we all do a little bit of everything at SUU, so he has to teach principles of macroeconomics sometimes. The other day he asked for pointers about summing up for his students why we can’t quite figure out what’s wrong with the economy. I came up with 26 reasons, most of which have been discussed in class, and all of which are now required.