What the Stimulus did...and didn't do....

Dylan Matthews over at Ezra Klein's blog has been doing serious work. He has gone and compiled the most recent studies looking at whether the ARRA was a net positive or not. I would go into the details of it, but it is definitely worth the read.

I have been hugely critical of the size of the stimulus, mainly that it was not big enough. But that was never to imply that it should not have been done.

But enough of my babbling, I will let Mr. Matthews take over:

Each approach runs into its own set of problems. The econometric studies have to deal with what social scientists call “endogeneity”: that is, the variable whose effect we’re trying to determine (the stimulus) could itself be affected by what we’re trying to study its effect on (the state of the economy). In this specific case, this means that econometric studies sometimes have to correct for the fact that harder-hit areas tend to get more stimulus spending. This says nothing about the stimulus’ effectiveness, but it can confuse attempts to evaluate that effectiveness statistically.

All of these studies have their own methods of overcoming the endogeneity problem, some of which are more effective than others. Whichever corrections one uses, however, one cannot run a perfect experiment with messy, real-world data, which necessarily limits what these studies can say. Of the five econometric studies detailed here, three conclude the stimulus had a significant positive effect, and two conclude it did not have much of an effect at all.

I know this will not really change anyone's mind, but having data always makes me feel a little better on the subject.

-Cheers