Monday, December 08, 2008

Free lunch?

Economist Robert H. Frank likes Keynesian multipliers. And why not push the pedal? In "Why Wait to Repeal Tax Cuts for the Rich?" he seeks more revenues to feed the multiplicand. In multiplier-land, it is ceteris paribus all the way.

Collegues and I have often used multipliers to estimate economic impacts -- but only to estimate short-term downside business interruption shocks. That is the only way to do it with a straight face. Where was the multiplier when rebate checks were sent out earlier in 2008? Where was that free lunch?