The moral of the story: If the government spends a fiscal stimulus package on goods and services without much public value (as in Case C), it could well stimulate the economy as measured by macroeconomic aggregates but leave the participants in the economy worse off (compared with a feasible alternative, Case A). Avoiding this trap requires that the government spend taxpayers dollars only those items that pass a strict cost-benefit test. That is hard to do quickly. Willy-nilly spending is a good way to stimulate the economy only if the outcome is judged by the wrong metric.
Humh, it is not quite simple as everyone thought! After all we need economists, we can not singing sings “please sky kill all these economists off.” Economy stimulus is not same as buying pair of shoes? For an example, if I buy pair of high heel shoe; shop make money – shop assistant paid wage- leather manufacture make a buck – and cow/crocodile farm making a buck - all of these guys go out spending money- buy ice cream – computer – go to dentist etc… is this willy-nilly? OR Australian Victorian Gov- extension highway 1 – tenders Joe’s construction company – Joe hire 100 people for doing the job- 100 people paid wage – 100 people going to spend their wage – pubs, buying bean sprouts for their stir-fry dishes, cars, perfumes for their lovers etc… is this more worthy? what is difference two these? How we are going to cost-benefit-test, that can take ages, as some of investments take years for making profit. Easily can see public good spending then how we measures its magnitude in normal sense? Is this means time and distant in here? What is wrong metric in this regard?
