Problems: Say's Law
On January 13, 2009, University of Chicago Business School Professor Eugene Fama wrote:
[S]timulus plans are not a cure.... In a ‘fiscal stimulus,’ the government borrows and spends the money.... [G]overnment infrastructure investments must be financed -- more government debt. The new government debt absorbs private and corporate savings, which means private investment goes down by the same amount.... The government gives with one hand but takes them back with the other, with no net effect on current incomes...”
Write down how you would explain to Professor Fama that this is simply the argument Jean-Baptiste Say made in 1803 (and that he recanted in 1829), and the argument that John Stuart Mill identified the flaw in in 1829. What is the flaw?
Limit your answer to 1500 words?
Limit your answer to 150 words?
Limit your answer to 15 words?
