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Getting creative with Keynes

Ryan Hahn's picture

If you really want to stimulate the economy, give out gift cards, or so says Virginia Postrel in the May edition of the Atlantic. And make sure to put a short deadline on it. Otherwise, consumers tend to be "hyperopic" - they put off enjoyment too long and let the card expire. Money quote:

During the stimulus debate, some economists, including Edward Leamer of UCLA, suggested that quickly expiring gift cards might boost the economy more effectively than temporary tax cuts, which people tend to put toward savings. Although you could use a government-issued gift card for groceries you'd buy anyway and bank the savings, people tend to treat gift cards differently. When you get a gift card, Leamer noted, you not only tend to spend it on something you wouldn't otherwise buy, but often wind up spending a bit extra - the perfect prescription for Keynesian stimulus.

Comments

Interesting product. Going by the current understanding of conspicuous consumption, it should work. Hope that people haven't gotten too good at economics and figure out that they can use the gift cards for essential commodities.

I would say the key is jobs, jobs, jobs. Jobs are not getting generated and people are cutting down spending. The number of dollar stores in my neighbourhood has gone up to 3 from 1 and people are cutting down taxi rides. I think we first need a direct, raw and uncooked jobs boost. Then everything follows.

Wow. This is so smart it's almost unhealthy. There's something in me that says that government should foster rational behaviour, rather than play on hardwired irrationality (Italian philosopher Croce called state lotteries "la tassa sul fesso" - ask Giulio for a translation). But then, this is probably just me being irrational :-)

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