We Are All in This Together

Dani Rodrik has a short, clear post on (a) why countries are tempted to engage in protectionism during recessions and (b) why they shouldn’t. It only uses 1st-semester macroeconomics. The bottom line is that the preferred outcome is for all countries to engage in fiscal stimulus at the same time. The hitch is that most of the developing world can’t afford to. The implication is that it is in the interests of the wealthy countries to find a way to support the developing world.

One thought on “We Are All in This Together

  1. During Dr. Johnson’s MIT class, when discussing European response and potential fiscal stimulus, he mentions that he’s not sure they should/could engage in simultaneous stimulus because of free rider problems (at least within the EU). Sounds like the only real solution is for the developed countries to really step up to the plate.

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