Quote Of The Day

Matt Yglesias has a very good post on Robert Barro’s latest.  Brad DeLong seems to agree with Matt.  Paul Krugman uses the word “boneheaded” to describe the Barro piece.

This exchange is a good micro-cosm of how the stimulus debate has proceeded.  A highly respected anti-stimulus economist puts up some anti-stimulus evidence in a highly imperfect test (in Barro’s defense, he did cover more than just WWII).  The anti-stimulus economist is attacked by pro-stimulus economists.  But the pro-stimulus proponents are focused on attack.  They are not putting up comparable empirical evidence of their own for the efficacy of fiscal policy and there is a reason for that, namely that the evidence isn’t really there.

I fully admit that I don’t trust the oft-cited evidence that tax cuts are 4x better stimulus than government spending boosts; I think the result is a mirage from underspecified models.  Overall we simply don’t know how well the proposed stimulus will work — if at all (is aggregate demand always the relevant war?).  It’s a kind of Hail Mary pass, an enduring belief in aggregate demand macroeconomics at the theoretical level, even in light of broken banks, sectoral shifts, and nasty, failing expectations, all mixed in with hard to spend well, slow to come on line, monies.  Yes it could work but our agnosticism should be strong rather than just perfunctory.

Tyler Cowen. Go to his post for pertinent links. Cowen asks for evidence that the stimulus will work since he assumes that one will pass. I don’t think that he will get it; DeLong, Krugman and all the rest are content to launch calumnies against anyone and everyone who speaks out in any way against the stimulus. It’s a lot easier than putting forth a cogent argument, after all.

(Via Tom Smith.)