Volume 8, Issue 2

The U.S. economy clearly needs stimulation, but the Obama administration’s plan for accelerated depreciation is an ‘old economy’ approach to stimulating aggregate investment and unlikely to ease the Great Recession, according to Michael Cragg of Brattle Group and Joseph Stiglitz of Columbia University. The authors suggest alternative policies consisting of carefully designed carrots and sticks.

Have economists forgotten what they once knew about financial markets, macroeconomics and their interactions? Brad DeLong of UC Berkeley certainly thinks so and interprets Larry Summers as saying the same.

So much for the Washington Consensus. The IMF has finally begun to come around and has realized that unfettered markets can create dangerous instability and inequality, according to Joseph Stiglitz of Columbia University.

Understanding how the economy reacted to fiscal stimulus in the aftermath of the deepest recession of the last fifty years is essential. Joshua Aizenman of the University of California, Santa Cruz, and Gurnain Kaur Pasricha of the Santa Cruz Institute for International Economics and the Bank of Canada show that aggregate fiscal expenditure stimulus in the United States, properly adjusted for the declining fiscal expenditure of the fifty states, was close to zero in 2009. Furthermore, the USA is ranked at the bottom third in terms of the rate of expansion of the consolidated government consumption and investment of the 28 OECD countries they studied recently.

To move beyond 'old economy' stimulus policies such as accelerated depreciation, we need to focus on ways to provide incentives for investment in intangible assets, such as worker training, according to Kenan Jarboe of Athena Alliance.

In contrast to Cramton and Katzman’s assertion that Medicare encountered serious problems with its pilot competitive bidding program, Thomas Hoerger of RTI International cites his early evaluations that suggested strikingly positive results.

Peter Cramton and Brett Katzman stick to their guns: Medicare auctions remain fatally flawed and must be fixed. They argue that contrary to Hoerger's comment, no comfort can be drawn from the fact that the market was able to withstand price reductions in early pilots.