Brad DeLong notes:

When can deficit spending in a recession help?

1. When it is part of a stable and sustainable structure of economic policy, so that nobody fears that it is the beginning of a process of rampant inflation or expropriation. In that case deficit spending will have no deleterious effects on investment, and to the extent that it gets more money into the hands of those who are temporarily short of cash it will boost demand and employment.
2. When things are already so bad (as in 1933 and 1934) that there is no investment anyway: if business confidence is already at its nadir, deficit spending cannot do any harm by reducing investment, and does good by putting people to work and boosting their incomes and their demand.

I’ll add further conditions, none of them absolute.  First, it should be accompanied by an expansionary yet stabilizing monetary policy (similar to Brad’s first condition).  Second, the money should be well spent, ideally on durable infrastructure.  Third, fiscal policy should be a signal of a government’s competence or seriousness about fighting the recession.  Fourth, I doubt it does much good if the core problem is bankrupt or otherwise malfunctioning financial institutions.

Mostly I am a skeptic about fiscal policy, if only because discretionary fiscal changes tend to be small relative to modern wealthy economies. 

This settlement in western Kenya, where Ms. Odera lives, has become
a giant test tube, and Ms. Okoth’s instruction is one part of that
experiment. Eventually there will be 10 such test villages, scattered
across the world’s poorest continent.

Led by Jeffrey Sachs,
director of the Earth Institute of Columbia University, the project
aims to fight poverty in all its aspects – from health and education to
agriculture and energy in one focused area – to prove that conditions
for millions of people like Ms. Odera and her neighbors can be improved
in just five years.

It is an important and uncertain gambit. If
it fails, initiatives like that pushed recently by Prime Minister Tony
Blair of Britain to greatly increase foreign aid to Africa may seem
foolhardy. If a single village cannot be turned around with focused
attention, how can whole communities and even countries be revitalized?

…The researchers behind the program are keeping track of every penny
they spend, trying to demonstrate that for a modest amount, somewhere
around $110 per person, a village can be tugged out of poverty.

They
have tried to measure exactly how bad Sauri was at the start of the
project last fall. Every home was surveyed to get an accurate portrait
of the population. Blood tests were taken among a smaller group for a
nutritional analysis, because many villagers eat only once a day, and
show it.

Blood will also be tested to determine how widespread
the malaria parasite is, and then again later, to see whether the
mosquito bed nets given to every villager help keep more people,
especially children, alive.

Here is the New York Times story.  Here is my earlier post on Sachs’s plan.  Here is an on-line World Bank discussion about when foreign aid works and doesn’t; they invite MR readers to join in.

The most loyal of MR readers will find this old hat, but the debate at this link, originally done for Reason magazine, provides a good summary of my views. Here is my bottom line:

To the benefit caps that we really agree on, Glassman wants to add government-regulated personal accounts. The economics here are straightforward, once unbundled from benefit caps. Our government would raise taxes (or borrow) to finance further private investment in equity markets. Furthermore those investments are to be regulated by the government. I expect that Reason readers, once they hear the plan described in these terms, will be suspicious.

Say that you, like me, expect to live another forty years.

Now imagine that I could learn to live with one less hour sleep each night.  The extra time adds up to almost two more years of life.  And by definition, two more years of awake life.  Which is worth about three years of life with one-third sleep.

I would give a great deal to live three more years, but I don’t try so hard to sleep less.

Nor do I enjoy sleep.  I enjoy "the feeling of having slept."  The best sleep is the sleep I don’t notice at all, and I would do without sleep if I could.  It appears that I find death much worse than sleep.

Might I have negative time preference for time (a non-storable) itself?  I would rather have an extra year in the distant future than many extra hours — adding up to a year — in the interim.

Much of my negative time preference for time stems from plain curiosity.  If I were single at the time, I would give up my last year of life for a year in 2250, if only to see how things turn out (I also would have a chance of trying some neat new goods, but for me that is a lesser attraction). 

I would rather be born later than earlier.  Even if I did not expect economic growth, I could learn more history.  So how much life would I give up for a true and comprehensive account of the future of the human race?  How much money?

Say that "deep-freeze" worked and the future were secure.  How many people would deposit a penny in the bank and wake up much later as billionaires?  Would you have an extra child — one more than you want — in order to freeze her and pre-arrange future care in this manner?  Is there a free-rider problem, and if so what must we do to keep people going in the present, thereby maintaining real rates of return for future "sleep astronauts"?

Addendum: Here is Shakespeare’s take, thanks to Robert Schwartz for the pointer.