John At The Center

Overall I find these debates confusing. I wonder for instance if Krugman’s blog example is actually comparing tax finance to debt finance, rather than temporary vs. permanent spending shocks. (Note also that Krugman is making a claim about demand or effective “stimulus” rather than output and employment, although I am taking the latter as what matter.)

Again, I don’t have faith in these models and I believe agnosticism is the correct stance. The point is not about who is wrong and who is right but rather how treacherous these analytical waters can be.  Beware!

via Marginal Revolution: Permanent vs. temporary increases in government consumption.