Stimulus plan and a new economic agent

February 28, 2009

Reacting to Daniel’s post from earlier this week. Yeah, these are valid points, especially about the mechanisms/market devices but there is something to add here, which is absent from the discussion (at least the bits I read/heard) and that is how crucially important is the overall sentiment (both public at large, policy makers and academics) for the success of the stimulus plan. Let us see, hypothetically, how such a sentiment can evolve. I agree completely with Daniel about the dominance of the archetypical ‘rational’ economic agent who will not use a tax for spending but, instead, save the additional funds. What we should be aware of is that, over the last few decades, successive generations of policy makers and economists collaborated in constructing that agent. The rise of supply-side economics along with the rolling back of the welfare state, are just two of the long-term trends that, coupled with intellectual support from leading economics departments, eroded the belief in the validity and usefulness of a Keynesian worldview. This may sound depressing as it implies that today’s public and policy makers are not just facing a dire economic situation but also have to deal with a dominant type of economic agent who is, in essence, antithetical to expansion plans. That said, there is hope here, I believe, because the same way the current ‘rational economic agent’ was put together, a different one could also come in its place – an Obama-style Homus Economicus, perhaps? 

2 Responses to “Stimulus plan and a new economic agent”

  1. danielbeunza Says:

    Agreed. The roll-back of the state has forced individuals to think about their own safety net: accumulate 401Ks, plan for private education, accumulate in case of unemployment, etc. And all this creates pressures to save. But, interestingly Americans were not saving.

    What I do find very interesting is how Obama has been drawing on values to promote his own policy. The inauguration speech and its “new era of responsibility” is one such example. Yesterday’s budget was another. One wonders if we’re going back to the oversocialized depiction of a society of norms and values that Talcott Parsons described.

  2. samir Says:

    If this were to happen, it would have drastic implications for economic & public policy. In one sense, it would swing the values debate even further back into the economic realm (the social realm has hardly been discussed over the last 50 days). And I imagine that Republicans would be fighting to keep the “traditional”, stereotypical, free-market Homo Economicus stick man alive vs. Obama’s new economic agent.


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