Thursday, May 27, 2010

Contradictory Reports?

A couple of interesting things are going on in macroeconomics and public policy. First we get research out of Harvard that seems to show that government spending (in this case earmarks) tends to reduce private investment. The paper is here, the press release is here, and Megan McArdle has a good post on it here. The comments to McArdle's post are also interesting.

At the same time, we get the CBO report on the effects of stimulus bill. Basically it says that government spending stimulated the economy and reduced unemployment. The CBO report is based on runs of macroeconomic models since no one can measure where the economy would have been without it.

While these two reports don't directly contradict each other, their conclusions certainly don't support one another.

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