Posted by Dave Prychitko on The Economic Way of Thinking blog.
The new October unemployment data is in. The national unemployment rate hit 10.2%, with 15.7 million people unemployed. The Obama stimulus plan doesn’t appear to be working.
What could we do with a trillion dollar-backed stimulus plan?
My first-best solution: There are a million millions in a trillion, so why not have a lottery — announced immediately — that offers a million dollars to a million unemployed workers? Let them spend the money as they see best fit. With odds at 15.7 to 1, that’s a terrific and potentially welcomed opportunity.
But there’s a problem. The BLS doesn’t have the names of the unemployed. The measure is a statistical estimate. It is based upon a survey of 60,000 households over four months, with a new group of 60,000 observed each month, and the data is then generalized.
So I offer my second-best alternative: By lottery, give away one million dollars to one million U.S. citizens. There’s around 300 million of us. It will likely be considered less fair than the first-best proposal (“Why should the money go to those who already have jobs?”), but so be it. Here, the chances of winning are lower — 300 to 1 — but still remarkably better than a state lottery ticket.
If Keynes is correct, it doesn’t matter to whom the money goes, as long as it is spent. My plan is better: think of the cost savings compared to the present plan of the administration. No rent-seeking problems, no bureaucratic waste to oversee spending projects, no delays in how to allocate the proceeds.
I think I’m joking here — I’m against aggregate demand management in any form, I don’t think it works to improve things, and in fact on net it is negative. But if the government is going to spend a trillion bucks to stimulate the economy, my proposal is less costly and would put cash immediately into the hands of a million citizens, citizens who spend their own money better than politicians and bureaucrats.
Posted by Dave Prychitko on November 06, 2009 at 09:02 AM
One Comment
I have an even better proposal. Instead of a lottery, which helps some people at the expense of others, why not just give everyone a flat $3000. It could be financed by a immediate $3000 lump sum tax. Everyone would be better off!