Ladies and Gentlemen, Start Your Engines...
Tyler Cowen is enlisted in the helicopter drop squadron:
Marginal Revolution: Will a helicopter drop of money stimulate aggregate demand?: I am happy to see Paul Krugman address the question. He writes.... "[A] helicopter drop is just like a temporary lump-sum tax cut. And we would expect people to save much or most of such a tax cut — all of it, if you believe in full Ricardian equivalence." I hold a different opinion for two reasons. First, cash and short-term bonds may be near-substitutes but they are not literally, strictly equivalent.... Those are not the only possible cases... but I take them to be the most sensible default cases. Both indicate that a helicopter drop of cash will work fine in boosting aggregate demand.... Maybe these arguments are incorrect but they date from a consensus established in the mid- to late 1960s and early 1970s, much of it springing from Patinkin's book on money and the subsequent discussions thereof. Krugman suggests this perspective is wrong, but he hasn't yet given me -- or others -- a reason to budge from it.
I'm still, curmudgeonly, saying that announcement of a 3% CPI inflation target is the right politically-palatable way to go right now. But whaddooeyeno?
