Why is it that conventional wisdom is so often wrong?Perhaps part of it is because we are intellectually lazy, and it is just easier to defer to the voices of the loudest—especially if they are saying something we want to be true.
But, I just wish I had a dollar in my thong for every time I've heard a pundit, anchor, commentator, politician, expert panelist or the President of the United States say that all economists, regardless of their political or ideological persuasion, agrees that the federal government must undertake a massive stimulus package inorder to kick start the economy out of the doldrums.If I did, I would be able to personally bailout the economy—even though this conventional wisdom is laughably inaccurate.
But, nonetheless it is taken as a matter of faith that this is the consensus of all economists.
Barack Obama
repeatedly says:“There is no disagreement that we need action by our government, a recovery program that will help to jumpstart the economy.”
This is simply not true—and that does not mean the only naysayers are partisan Republican hacks or hired guns.
On Wednesday
there was a full page ad
in the New York Times, paid for by the CATO Institute, signed by two hundred academic economists who respectfully disagree.Three of them are Nobel Laureates, but are not media darlings like Paul Krugman:
Edward C. Prescott is Chairman of the Department of Economics at Arizona State University, and won the 2004 Nobel Prize in Economic Sciences for two important papers that advanced the field of dynamic macroeconomics.
Vernon L Smith
is a Professor of Economics and Law at George Mason University, and won the 2002 Nobel Prize in Economics
for having established laboratory experiments as a tool in empirical
economic analysis, especially in the study of alternative market
mechanisms .
James M. Buchanan is currently Advisory General Director of the Center for Study of
Public Choice, Distinguished Professor Emeritus of Economics, Board of
Visitors, President, and Faculty George Mason University , and University Distinguished Professor Emeritus of Economics and Philosophy at Virginia Polytechnic. Dr. Buchanan won the 1986 Nobel Prize in Economics for his work in public choice economic theory.
You really do need to get out the hip waders with the BS that is being spewed out about the need for this emergency nine hundred billion dollar stimulus package.What really makes me need a stiff drink, is that there is not one single instance of an economy being kick started out of a recession through government spending. Paul Krugman even admits this—albeit he says that FDR's New Deal was unsuccessful because it was not big enough.
In fact the truth is that all this Keynesian theory stuff had been pretty much discredited by economists until its resurrection by Democratic politicians in the last six months.
John Cochrane, a professor at the University of Chicago , says that among academics over the last 30 years, the idea of fiscal stimulus has been discredited and in graduate courses, it is "taught only for its fallacies.” 
New York University
economist Thomas Sargent
agrees: ‘The
calculations that I have seen supporting the stimulus package are
back-of-the-envelope ones that ignore what we have learned in the last
60 years of macroeconomic research.”Now, some of this spending is good for providing a safety net until the economy gets back on track—but we should not pretend that it is an economic stimulus that is going to rocket us back to those glorious spendthrift days of the George W. Bush administration.
But despite what Paul Krugman and Barack Obama believe, it is no free lunch. If massive government spending grows the economy, then we should all be millionaires after eight years of George W. Bush.
While it is true that jobs will be created by the government spending, as usual the government is hopelessly inefficient.
