I’ve been having trouble reconciling my support for (or at least acceptance of) the Democratic fiscal stimulus plan with the reality that the evidence on stimulus is extremely murky. Then it hit me: Maybe this is Pascal’s wager all over again. From the Pensees:
If there is a God, He is infinitely incomprehensible, since, having neither parts nor limits, He has no affinity to us. We are then incapable of knowing either what He is or if He is. …
Let us weigh the gain and the loss in wagering that God is. Let us estimate these two chances. If you gain, you gain all; if you lose, you lose nothing. Wager, then, without hesitation that He is.
We are incapable of knowing if spending another $800-odd billion the government doesn’t have will end or even significantly ease the current recession. But let us weigh the gain and loss in wagering that stimulus will work.
The gain if it does work is that the recession ends, fewer people lose their jobs and—most important—a continuing downward spiral in which financial trouble and economic decline keep reinforcing each other is averted.
The loss if it doesn’t work is, well, $800 billion. That, and a somewhat increased risk of default on our nation’s debts and a complete collapse of the dollar. But that risk is already there even without the stimulus package, and a stimulus package that worked as advertised would significantly ameliorate it.
Okay, so it’s not quite as simple as Pascal’s wager. And a lot still depends on subjective judgments of how effective stimulus can be and how great a risk of economic meltdown we face. But it clarified my thinking at least a little bit.