The recent fiscal policy debates

Russ Roberts surveys the fiscal policy back and forth, and Scott Sumner also has a good post.  I’ll add this: yes there is theory, but there is also what one chose to blog about, the tone and mood and certainty of what one wrote, and what data one was looking at or emphasizing.  Those are also “tests” of one’s overall approach.  Viewed in that light, there simply isn’t any way to argue that the American or British Keynesians did well on the sequester or on the British economic recovery, in the sense of being reliable guides to what was going on at the time.  It isn’t just about “missing one number.”

And note that “frameworks” do not make predictions of their own, so it is off base to respond that Keynesian economics did better here than the Keynesians.  Part of a framework is the very human connections it requires in terms of bringing the moving parts of the model into contact with real world events and data.  An AD-AS model is just lines on a piece of paper, so Keynesian economics does in fact require that Keynesian economists can use and measure and calibrate the model in the appropriate ways.

That all said, non-Keynesian approaches have had their Waterloos too.  The point is pluralism, not to throw out the ideas of any single economist.  For a moment, forget about 2013 and think about 1973-2015.  You need quite a few analytical tools to even begin to make sense of that longer period.


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