Consumer As Final Judge

Dr. Anthony Bradley:

The $787 billion economic stimulus President Obama signed into law this week rightly recognizes that spending stimulates the economy. That measure, however, misses the mark: It is targeted, demand-driven consumer spending is the engine that grows economies, not frivolous government spending for future "needs." We have forgotten what Harvard economist and past president of the American Economic Association, Frank Taussig, told us in his 1911 book, Principles of Economics: "We must accept the consumer as the final judge."

As recent history teaches, economic crises arouse an emotional panic that tempts us to believe that centrally planning the economy is the medicine for economic recovery and the best safeguard against future volatility. To make matters worse, spin doctors lead anxiety-laden people to believe the notion that without government oversight we are doomed. This history displays a major moral temptation of economic crises: a prideful belief in our capacity to "save" the economy by controlling the decisions of the millions of human beings who participate in it every day.

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