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I just want to point out that Keynesian economics, which apparently have been discredited, is literally what Donald Trump and the Republican Party, which were a

I just want to point out that Keynesian economics, which apparently have been discredited, is literally what Donald Trump and the Republican Party, which were apparently anti-Keynesian economics are practicing. So if Krugman got it wrong, he got it wrong in a way that convinced everyone in the US political spectrum that it was the right thing to do. Further, Krugman was very clear thst it was important for the government to spend heavily in a recession, when government spending wouldn’t crowd out private spending, and specially st the time (and even now) the US has a vast requirement for infrastructure maintenance, which thanks to the crash could have been gotten done on the cheap. It wasn’t an unconditional endorsement of government spending. I didn’t read too much further into this article, because I was heavily involved in this particular aspect of the response to the financial crisis due to a project in class, and was well aware of what different commentators, including Krugman were saying, and this article mischaracterises the part that I do remember.

caycep 7y ago
I have heard a couple of times "Keynesian economics discredited" (or just the term "discredited") thrown around, but where does this line of thought come from? My (lay) impression was that Keynesianism had resurged over the past couple of decades due to the failure of more free market and/or austerity economics, especially in Europe.
Matticus_Rex 7y ago
Republican Keynesianism isn't new, either -- much of the supply-sider argument (especially as formulated by Laffer in the Reagan era) is fundamentally Keynesian. Politicians of both sides run into an incentive problem when implementing Keynesian policy because it requires what commentators denigrate as "austerity" in good times in addition to heavy recession spending. There's every incentive for politicians to keep the spending up in good times, and little (other than ideology or commitment to good governance, neither of which have proven especially important to most political actors) incentive in the other direction.
hcknwscommenter 7y ago
"Keynesian economics, which apparently have been discredited" Uhh. Nope. "literally what Donald Trump and the Republican Party, which were apparently anti-Keynesian economics are practicing." Uhhh. Nope. I'll be wrong in my oversimplification, but at least more right than the above. Keynes' central argument was that in times of depressed aggregate demand and high unemployment, the government can play a massively positive role in stimulating aggregate demand. Keynes never argued in favor of stimulus at times like these.
- AnimalMuppet 7y ago
  > Keynes never argued in favor of stimulus at times like these. Further: He argued for austerity at times like these, so that the budget would balance over the whole cycle. That idea has far more restraint and fiscal conservatism in it than either party has shown in decades. One could argue that, with interest rates this low, borrowing to work on infrastructure makes sense. That may be a reasonable thing to do, but it's not a Keynesian policy (because we're at the wrong point in the business cycle).

caycep 7y ago

I have heard a couple of times "Keynesian economics discredited" (or just the term "discredited") thrown around, but where does this line of thought come from? My (lay) impression was that Keynesianism had resurged over the past couple of decades due to the failure of more free market and/or austerity economics, especially in Europe.

Matticus_Rex 7y ago

Republican Keynesianism isn't new, either -- much of the supply-sider argument (especially as formulated by Laffer in the Reagan era) is fundamentally Keynesian. Politicians of both sides run into an incentive problem when implementing Keynesian policy because it requires what commentators denigrate as "austerity" in good times in addition to heavy recession spending. There's every incentive for politicians to keep the spending up in good times, and little (other than ideology or commitment to good governance, neither of which have proven especially important to most political actors) incentive in the other direction.

hcknwscommenter 7y ago

"Keynesian economics, which apparently have been discredited" Uhh. Nope. "literally what Donald Trump and the Republican Party, which were apparently anti-Keynesian economics are practicing." Uhhh. Nope. I'll be wrong in my oversimplification, but at least more right than the above. Keynes' central argument was that in times of depressed aggregate demand and high unemployment, the government can play a massively positive role in stimulating aggregate demand. Keynes never argued in favor of stimulus at times like these.

AnimalMuppet 7y ago
> Keynes never argued in favor of stimulus at times like these. Further: He argued for austerity at times like these, so that the budget would balance over the whole cycle. That idea has far more restraint and fiscal conservatism in it than either party has shown in decades. One could argue that, with interest rates this low, borrowing to work on infrastructure makes sense. That may be a reasonable thing to do, but it's not a Keynesian policy (because we're at the wrong point in the business cycle).