Out of that entire post, you pick that one sentence to quote?
The whole point of the post, and the rest of the paragraph you quoted, was to suggest that trying to legislate artificial demand is a futile effort. Why take it out of context like that?
Perhaps I wasn't being clear. What I intended to say was that state interference in the form of monetary injections and atempts to create production that is without demand is a recipe for failure. When I said that a stimulus program must encourage demand I meant that the business environment must be made more favourable.
Like you, I am more in favor of option 2,
but.........
...there are a lot more than two schools of thought when it comes to economics. I see what you are saying here, and you are correct to some degree (marketing professionals deal with these principles all the time), but a general positive trend in economic activity can only be brought about by leaving the market alone. There is no amount of state finance or manufactured demand that can significanty affect the free market in anything but a detrimental fashion.
Economics is neither a science nor an art. Economies consisting of millions or billions of individual transactions with an untold number of motives do not lend themselves to categorization or artistic interpretation as a whole.
The market cannot ever really be controlled. It can be hindered, and it can be stifled, but it cannot be stopped or directed with any certainty. It is human nature itself, expressed in the forms of competition and mutually beneficial transactions. We can attempt to control it with the intent of supporting an ovveriding purpose, but we will not be successful. All we will ever really achieve is to drive the market underground, which results in a black market and the associated criminal activity.
Our best bet is to just leave it alone. Beneficial enterprises will take root and prosper, and bad ones will die. Smart consumers will benefit, and dumb consumers will have to rethink their behaviour. One way or the other, the economy will reach a kind of homeostasis.
The worst thing we could do is to entrust economic policy to economic "scientists" or politicians. Talk about having the fox guard the henhouse
