Advancing a Free Society

Yes, There Is No Mainstream or Consensus on Stimulus Spending

Tuesday, August 16, 2011

In its Sunday edition, the New York Times informed its readers that “a wide range of economists say the administration should call for a new round of stimulus spending, as prescribed bymainstream economic theory, to create jobs and promote growth.”

In my post of August 11 Paul Gregory Forbes I rejected the notion of a  consensus and pointed out that  the seven Nobel Prizes  went to economists who cast doubt on the Keynesian model and zero to  economists for advancing the Keynesian agenda. The Nobel prize committee itself has cast serious doubt on the characterization of Keynesian economics as “mainstream.”

In his “No Near-Consensus Among Economists for Another Stimulus PackageJohn Taylorwrites “there are plenty of economists who think that gradually reducing spending and not increasing taxes is better for job creation.  In June, for example, 150 economists (including me) wrote that a debt deal ‘that is not accompanied by significant spending cuts and budget reforms would harm private-sector job growth.’”

Disagreement among economists on Keynesian stabilization policy is not new. Two researchers  analyzed a randomized survey of one thousand members of the American Economic Association from 2003. AEA members were asked their views on a wide range of issues, including a set of questions on the economic role of government. The results of this study were published in 2006.

Continue reading Paul Gregory…