Fiscal Stimulus and Retail Trade

Ashton de Silva and Sinclair Davidson demolish the myth that fiscal stimulus has led to above trend growth in retail sales.  The authors note that:

the media has been full of articles indicating that individuals have increased spending on poker machines and plasma televisions. Some individuals told reporters that they intended to get tattoos or spend the money on prostitutes. That type of spending does not undermine the policy objective. The policy objective is to stimulate increased spending in the economy irrespective of what the spending actually entails.

This sort of media commentary should also be rejected because it supports the elitist notion that people cannot be trusted to make consumption choices in their own interests.

posted on 12 June 2009 by skirchner in Economics, Fiscal Policy

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