Thursday, 27 June 2013

Questions for Krugman and Kuehn

By Russ Roberts

Steve Landsburg (channeling Murray Rothbard) points out that the simple Econ 101 Keynesian multiplier is a fraud because it assumes that an increase in G is not offset by any other behavioral changes.
Paul Krugman and Daniel Kuehn accuse Landburg of caricaturing Keynesianism–of course there can be crowding out, the multiplier doesn’t hold at all times, it’s not a constant, and so on.

Here is Krugman:
Anyone who’s followed the various attacks on yours truly knows what I mean: Keynesians believe that budget deficits never matter, that increasing demand can solve all economic problems, that there’s no such thing as a supply side to the economy, that more spending is always good. You can see it even in the comments to Kuehn’s post, with people expressing doubt about whether there’s crowding out in my textbook. Let me suggest a very difficult research project: how about actually looking at the book?
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