Fiscal Stimulus

Mankiw weighs in again:

http://gregmankiw.blogspot.com/2008/12/let-rent-seeking-begin.html

Mankiw suggests that giving people stimulus checks will be better (note
that he doesn't use the term "more efficient") than giving money to
public works projects like zoos.

But would somebody please tell me why it's less desirable for us to
spend on zoos than it is to spend on electric teakettles and iPods? (I
happen to like the zoo, as do the approximately 31,000 people who visit
the Denver zoo every weekend). And I happen to think their social value
is much greater than the junk people will buy with their stimulus check.

Okay, I kid about the electric teakettles and iPod. But here's my opinion:

Stimulus projets will employ people that otherwise wouldn't have been
employed. So will stimulus checks. There is some debate about the
extent to which each of these types of stimuli will improve the
economy--if I understand correctly, economists disagree on the
multiplier effect of each type of stimulus. Still, they will both put
money in the economy and increase employment.

There are two important differences, however, in my opinion, between
these two forms of stimulus.

The initial effects of these stimuli will be different. The stimulus
checks would go to everyone. New employment through economic stimulus
projects will be more likely to provide work to people who are
unemployed at the moment. I think this is important:

Although I would love to get another stimulus check, the fact of the
matter is that I don't need the money (don't tell Emily I said that).
I'm always happy to have more money, but I don't need it as much as
somebody who just lost their job. I'm covered for a while--at least
until I get out of school.

Ironically, that stimulus check really isn't going to help the guy or
gal who just lost their job. A couple hundred dollars will be nice, but
it won't compensate them for the economic, or the psychological cost of
having lost a job.

Having a job at a public works project, however, will. That will help
them put food on the table and put their kids through school.

Of course, there is always more "waste" and less "efficiency," in an
economic sense, when the government picks winners. But in another
sense, giving $600 to somebody who doesn't derive much utility from that
money (like me) is pretty inefficient. I'd rather my $600 goes to
somebody who needs it.

The second difference is sustainability. Not in an ecological sense--I
mean sustainability in terms of the long-term benefits of public works
projects.

Take zoos, for example. Zoos are beneficial in a lot of ways. They
educate people, they provide entertainment in a desirable way (as
opposed to, say, watching _The Young and the Restless_), and once these
public works projects are completed, they will provide these social
benefits over the long term.

On the other hand, you send me $600, and I'll buy an iPhone. iPhones
are cool. And useful. But they don't provide the same educational,
recreational, or social benefits as zoos. Maybe I'm not as rational or
as efficient as a lot of other people, but I bet that buying toys like
that will be what a lot of other people will do to.

Frankly, that just isn't as good as employing people who lost a job and
need to provide for their families.