Monday, January 19, 2009

Reconsidering the Domestic Demand Expansion in Taiwan

While the Taiwan government--both central and domestic-- and public opinion bandwagons on the Domestic Demand Expansion Project (擴大內需方案), they should keep in mind opinions on the other side of the argument. 

Grew Mankiw has recently wrote an article on New York Times, "Is Government Spending Too Easy an Answer," reminding the Obama administration certain unsolved puzzles regarding Keynesian prescriptions. 
Economic downturns, Mr. Keynes and Mr. Samuelson taught us, occur when the aggregate demand for goods and services is insufficient. The solution, they said, was for the government to provide demand when the private sector would not. Recent calls for increased infrastructure spending fit well with this textbook theory.

But there is much to economics beyond what is taught in Econ 101. In several ways, these Keynesian prescriptions make avoiding depressions seem too easy. When debating increased spending to stimulate the economy, here are a few of the hard questions Congress should consider...
As I've been saying in the past, policy discussions in Taiwan politics tend to focus on minutiae instead of core theoretical arguments. In this case, as usual, the aforementioned counterpoint has received nearly no attention in our media.

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