"Stimulus Spending and Jigsaw Puzzles" - Coordination Problem

Wednesday, March 23, 2011
"In a series of newspaper columns last year, Don Boudreaux compared the economy to a giant jigsaw puzzle with billions of pieces that can fit together in numerous combinations only a small number of which produce a meaningful pattern or picture. We learn which combos work because they “beep” every time we get one “right” and those beeps give us pleasure. I like that metaphor and I want to make use of it to talk about Austrians, Keynesians and stimulus spending. Imagine that we do what Don describes and start constructing this jigsaw puzzle, but rather than the beeps reflecting combinations that create meaningful patterns, imagine that the beep mechanism is suffering from a computer virus that leads it to commit both Type I and Type II errors. The result is that we end up creating a puzzle that sees no meaningful image emerge (whether one characterizes the pattern as “out there” or emergent isn’t essential to my point). Suppose further that we eventually use up all of the pieces and discover we have wasted our time because there is no meaningful picture to be found." Read more"Stimulus Spending and Jigsaw Puzzles"  Steve Horwitz  Coordination Problem, March 16, 2011.  Image by Filomena Scalise / FreeDigitalPhotos.net.