Getting creative with Keynes

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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.


Ryan Hahn

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