An interesting post from Robin Hanson on the stimulus bill. Here’s an excerpt (emphasis mine):
Wise taxpayers who get stimuli tax rebate checks should mostly save them, realizing that future taxes must rise to pay for those checks. For similar reasons, wise taxpayers should also spend less upon hearing about government spending increases. So with wise taxpayers it is not obvious that tax rebates or government spending increases would help much with the downturn.
The consensus among macro-economists seems to be that people can in fact be fooled by such stimuli, but as Tyler indicates, it is not clear which policies most fool us. In particular, the more public attention we give to the stimuli, the less they might work. We might make people realize that they need to compensate via saving, and the more we scare folks into thinking we need huge stimuli, the more we might scare them away from normal economic activity levels.
So should we stop explaining macro-economics during this crisis, and stop saying how desperately we need stimuli?