STIMULUS - September 8, 2011

For those who had read and understood “The Affluent Society”, the demands of support for the economy back in November 08 lay supporting the States. Instead of waiting to learn what promises those governments might make as a support for the payroll, it would have been wise to immediately announce a program of federal support for those commitments they had made when they thought they were staking their own money. Obama should have announced that there would be an immediate infusion of about $200 billion to them on a per capita basis to enable them to retain their public employees, especially teachers, and to continue the infrastructure contracts they had already made under the same belief, with further help to follow based not on promises, but on the way in which the first payment sustained the economy. Of course, the economic establishment was operating not on the basis of Keynes, but on Ayn Rand, as dictated by the business schools, under the illusion that Game Theory was the answer to every problem in the economy. It would have been hard for Obama to move against the nearly unanimous opinion of those who proclaimed their dicta scientific, having armored themselves by buying themselves a counterfeit Nobel Prize to crown each other with. Of course, we now know that the Democrats had abandoned the legacy of the New Deal and had lost even the history of that remedy 80 years ago. So the result was to undertake a recovery that would have been weak even in the hands of Herbert Hoover. There remains the wisdom that those who have not learned the lesson of history will be condemned to repeat it, and we are now reaping the harvest of the policies that did not work for Hoover and now not for Obama. Game Theory is an interesting study in the situation of a simple game, but the economy is deeper than that, and has many more dimensions.