Quick, More Stimulus!

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More than thirty-five years have passed since Friedrich Hayek said in his Nobel speech, “The Pretence of Knowledge” (1974):

“The theory which has been guiding monetary and financial policy during the last thirty years… consists in the assertion that there exists a simple positive correlation between total employment and the size of the aggregate demand for goods and services; it leads to the belief that we can permanently assure full employment by maintaining total money expenditure at an appropriate level.”

Paul Krugman, Brad DeLong and others are now calling for bigger and better stimulus in the hopes of decreasing unemployment more rapidly. Most of this is wishful thinking or, should I say, value-signaling. If you care about the poor and middle class, if you realize the irreparable harm that long periods (months, years?) of unemployment may cause, if you recognize the many unmet public sector needs we have, you would doubtless advocate more fiscal stimulus. In an equation: Good Person = Advocate of More Fiscal Stimulus.