Bernanke Issues Warning: Don't Buy My Book

Today's Wall St. Journal includes an article about the Fed. Chairman issuing a warning about the economy.  However, given his actions since taking over the Fed. in February, 2006, he should be warning people not to buy his book on Macroeconomics.  Basically, if you read this book, you'll find explanations for exactly why what he's been doing doesn't work.

I was studying Macroeconomics in business school in the first quarter of 2008.  During this time, he proposed stimulus checks as a way to encourage the economy.  I remember chatting with a fellow student about how his book explicitly discussed how this doesn't stimulate the economy.  We weren't quite sure why his book would strongly recommend against stimulus checks while he recommends doing it as Fed. chief.

The argument against is basically that people recognize that the government handing out money is actually a deferred tax, so they don't increase their spending.  This behavior was explained to be true regardless of the size of population that received the stimulus.  If a subset receives the stimulus, they may increase their spending, but the population not getting the stimulus decreases their spending.  In fact, the group receiving the stimulus has been found not to significantly increase their spending, so basically the net effect is to decrease consumption.  Governments frequently try this technique, so researchers have had plenty of data upon which to base their findings.

However, this particular item is not the only one where his actions disagree with his book.  The book lays out explanations of savings, investment, and the effects of increased government spending and taxation.  Long term answers to our economic problems are what we need and can be found in the book.  Granted the book I used in business school was the 6th edition published in 2008.  Maybe the new edition has changes which explain his actions as Fed. chief.