Multiple equilibria

Peter Levine:

If we are going to borrow a trillion dollars from our kids to spend now on economic recovery, the money had better be well spent. Avoiding waste and fraud is a political imperative; Obama’s reelection may depend on it. It also seems important economically. A big rationale for fiscal stimulus spending is to restore confidence. My guess is that people will feel confident if they believe a trillion dollars is being well deployed–less so, if they think it is being wasted.

Do we really think equlibria are this sensitive to such small expectational perturbations? Has anybody read Roger Farmer and understood it?

I have, but I didn’t.

PS – Prof. Levine has some good ideas for putting the budget online… read that post! Do it!

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