ACROSS the United States, thousands of federally financed stimulus projects are under way, aimed at bolstering the economy and putting people to work. The results so far have not been spectacular.
Why not? There’s nothing wrong with the idea of fiscal stimulus itself. We need more stimulus, not less — but we need to focus much more on actually putting people to work.
Two friends of mine, both economists, came upon a stimulus project recently that illustrated the problem. On a Wyoming highway they saw a sign that read “Putting America to Work: Project Funded by the American Recovery and Reinvestment Act” and prominently featured a picture of a worker digging with a shovel. Out on the road, there was plenty of equipment, including a gigantic asphalt paver, dump trucks, rollers and service vehicles. But there wasn’t a single laborer with a shovel. That project employed capital, certainly, but not many human beings.
Like many such stimulus projects, it could be justified if you accept the idea that gross domestic product, not jobs, is central — a misconception rooted in economic theory, or at least in the way that Keynesian economic theory has evolved.
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