I'LL admit it, I am ambivalent about whether we need more fiscal stimulus and still think it's too early to tell how effective the last one was. I dare to voice my concerns and I get labelled “a conservative economist”. But my worries are based on my professional training—my fields were public finance and macro—more than any political agenda. Bloggers and journalists (and bloggers/journalist) of both polical persuasions appear to be outraged with the economics profession. Lately I feel as though we've been cast as right wing nuts locked in an ivory tower for daring to suggest the limits of fiscal policy.

The fact is that economics is not a right wing cult; some members of my dissertation committee were notable Republicans, but others were Democrats.

People drawn to the economics profession do tend to favour the market mechanism to allocate resources instead of the government. This inclination was certainly part of my calling. I grew up in a small community where many people lived for generations in what seemed to be inescapable poverty. This poverty co-existed with a local government that thwarted countless attempts of large scale business development. Community members were determined to limit development in order to preserve our rural tranquillity. I then spent some of my early adulthood in Eastern Europe, shortly after the fall of communism. These experiences raised the very questions which inspired me to go to graduate school.

Now clearly, both of these examples have little to do with a large fiscal stimulus—but they do colour my view as a professional economist. I tend to favour the power of individuals making sensible decisions for themselves rather than the government stepping in. That's not because I believe everyone is a rational, well-behaved agent. People often make bad decisions, including policymakers. When you have more people acting in their self-interest, instead of just a few making decisions for everyone else—on average you get better outcomes.

Now, contrary to popular opinions on both the extreme right and left, most economists do not believe in zero government intervention. Quite the opposite. We've long since moved past the days of extreme Keynesian versus hands-off Hayek. The central question in public finance is what's the optimal level of government intervention and how to implement it without causing harmful distortions. If we honestly believed that the government should always do nothing, there'd be no questions to research and we'd all be out of a job.

Back to fiscal policy. The years I've spent studying these issues leads me to believe it can do some good—especially if the resources are allocated to useful projects that enhance future growth and are in the natural domain of the government—like building roads and bridges. But in practice the government does not have the best track record picking the most effective projects, due to political constraints. It is also slow to implement them. Evidence seems to suggest you get more bang for your buck with tax cuts because rather then a central planner making all the decisions, growth is driven by individuals. However, the bottom line is fiscal expansions are expensive and we still don't know how effective they really are.

I am also wary of mounting deficits. A fiscal stimulus now relative to impending entitlement bombs is not such a huge deal. If it can really spur a vigorous recovery it is certainly worth the cost. But we do need to be mindful of growing debt. The fact that Treasury yields are so low right now should not provide false comfort that America can borrow cheap indefinitely. Treasuries, for now, are the safest asset around and there's still a flight to quality. But it's self-defeating to design your fiscal policy around the assumption this special position will last forever.

Also even if we can find evidence of past, successful stimulus (maybe, say, the 1930s), it's not obvious it would work as well today. The economy is much more global now. Suppose we stimulated a firm building a new factory and that expansion occurred in China. We would still see increased rates of growth from a stimulus, but the multiplier is probably smaller than it was in the past. Is that a fair burden to put on future taxpayers?

The high cost of fiscal stimulus, mixed evidence on how effective it will be, and growing deficit leaves me deeply ambivalent. It may be worth the gamble, but it surely merits thoughtful debate.

I understand the temptation to simplify the issue and label all professional economists who dare question the government's omnipotent abilities right-wing quacks. It reminds me of the debate between creationists and evolutionary biologists. Politics also muddles the science of this debate and I can see why. Creationism is a nice story, a more comforting one because it involves a higher being taking good care of you and a grand plan. I'd like to believe it too. Just like I'd like to live in a universe where some all-knowing, altruistic government can perfectly control markets and fairly redistribute income so we all live in peace in harmony, with no poverty and no adverse effects. Unfortunately the empirical evidence suggests neither story is true.