why is there no time lag for automatic stabilizers?

Expert Solution

Automatic stabilizers are events that happen without policy decision-making, For example, unemployment insurance is an automatic stabilizer; once it is set up by law, administrative agencies implement the policy as a matter of course. No further policy-making decisions are needed.

There’s little implementation lag, although the effects of implementing the policy aren’t necessarily different from discretionary. And there’s no guarantee that the waiting time to see the effects of either a discretionary or automatic stabilizer policy would differ if the policies were the same.Automatic stabilizers don’t have the lag associated with policy decision-making, so there’s a difference.

Because discretionary measures involve changing policy, in a representative democracy like those in Western Europe, Scandinavia and the US and Canada and Japan and Taiwan, arguing about whose ox gets gored or fattened is an integral part of the process. Automatic stabilizers do not have this problem, as everything is “automatic”. No politics in implementation, as those questions were settled when the policy was set up. Maybe that’s incorrect — politics might even have been built in to the automatic stabilizer

Rahul Sunny answered 8 months ago

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