Evidence-Based Macroeconomics, Firemen and Fires

The firemen came and put out the fire.  They kept the fire from spreading further, but not before a number of homes burnt down.  Now the townspeople are standing around the smoldering ruins, looking up at the firemen, and a scandalous rumor emerges:  that the firemen started the fire.

Via Paul Krugman, here is a really wonderful talk by Chistina Romer on the effects of fiscal stimulus.
Her challenge is to convince people that the Obama administration's big stimulus was actually stimulative, even though, despite the stimulus, the economy is still in ruins.  The challenge is that stimulus is like firemen: we only use it when disaster occurs. 

It makes some important and powerful points about why people should believe fiscal stimulus is in fact stimulative.  But perhaps even more than that, it's wonderful in its clarity about (a) how important empirical answers are, (b) how difficult it is to obtain empirical answers to big economic questions, and (c) that good empirical economics is often less about technique and about "shoe leather," as the former statistician David Freedman liked to say.

Also, it's just a fine example of good presentation: beautiful in its clarity of thought and persuasiveness.


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