Saturday, January 30, 2016

I Don’t Know Whether I’m Smart or Clueless

With respect to the previous post about China, it occurred to me right after I posted it that I actually did say something very much like what Batson said.

Here’s me, in a panel discussion, in October 2008 (a month after the Lehmann bankruptcy, when the Great Recession went from mild to horrible):

This latest round of trouble started about a month or so after the Olympic construction got finished. Essentially, the biggest expansionary fiscal policy project in the world just ended (official Chinese numbers are always dubious, but Rabinovitch 2008 reports spending of no less than $40 billion). If we are going to think seriously that a fiscal stimulus package coming out of Washington is going to boost the economy, then in order to retain our credibility we need to also acknowledge that the Chinese just slammed on the brakes of the global economy (note that the popularized dollar value of the Obama stimulus package is much larger). Experts may argue about the importance of that to other economies, so it should be emphasized that Olympic spending is a lot more like textbook fiscal policy than any of the stimulus proposals that have come out of Washington (see Colander 2007). [pg. 63]

The Beijing Olympics began on August 8, 2008. I have inside information: a very old friend was an architect on one of the stadiums, and told me they finished his venue on the morning of August 9 … with events starting that afternoon. Athletes were arriving while the architects were doing their final sign-offs.

Anyway, within a month of a minor downturn turning much worse, and within two months of the largest fiscal stimulus going on in the world at that time … I was saying something very much like what Batson said about housing construction in China.

So I do not know if I’m smart of clueless. But that’s the way macroeconomics is — lots of details and clues that critical thinkers have trouble assimilating, and too many “just-so stories” spread by other academics, the media, politicians, and bureaucrats.

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