Those of you who have been with me for a while may remember that I wrote a while back about the misleading nature of Allstate’s television ads. Today I came across a less detailed but still somewhat inaccurate bit of advertising from State Farm, courtesy of This Young Economist:
So many things to think about here. In no particular order:
- The title of my site is pretty appropriate since I am apparently good at making everything dirty. (Click here if you don’t believe me.) As such, my first thought was something along the lines of “If I could stimulate my own economy, what would I need models for?” *rim shot* I would never stimulate my own economy- I think my grandmother told me that would make me go blind or something. (Perhaps that’s only true for boys, I don’t really know the details.)
- As This Young Economist points out, Tyler Cowen just came out with a book entitled Create Your Own Economy. If I were him, I’m not sure how I would feel about my book seeming closely tied to a cheesy advertisement for an insurance company…
- I even kind of object to the message in the advertisement. Ok fine, saving 40 percent on auto insurance would free up household resources to either save or spend on other things. Does that really count as a stimulus or just a shift? Also, from the perspective of the overall economy, it’s actually potentially counterproductive as a stimulus. Why? Let me point you to my brief foray into talking about the concept of a spending multiplier. Remember that? The basic idea is that spending money is a good thing in terms of economic stimulus, since that money goes to other people who spend it and so on and so forth. Therefore, if people take their 40 percent savings and spend it elsewhere, the economy is back where it started, and if they take the 40 percent savings and put it under their mattresses, it’s actually causing contraction rather than stimulus.
I hope this discussion has been, um, stimulating.