Department of "Huh?!": John Cochrane III
Digby on Why We Vote Against Ron Paul

Paul Krugman: Sad Things

Paul Krugman:

Sad Things (Wonkish and Trivial): I see that some people out there don’t like me. A couple of odds and ends:

John Cochrane weighs in on the Ricardian equivalence debate, sort of. I say “sort of” because he defines Ricardian equivalence as

the theorem that stimulus does not work in a well-functioning economy

which isn’t at all what it means to the rest of us, and certainly not what Ricardo meant (for the record, it’s the proposition that the timing of taxes doesn’t matter for consumer spending, so that temporary tax cuts don’t change spending).

And then he “explains” that government spending can’t increase demand because of… Say’s Law! Which, of course, Keynesian economists have never thought of.

It’s quite remarkable. And I mean that in the worst way: 80 years of hard thinking about economics, completely forgotten.

I would say that it's not 80 years of hard thinking completely forgotten. I would say it's more like 180 years of hard thinking completely forgotten. John Stuart Mill and Jean-Baptiste Say both new by 1829 that unemployment rose when economic agents--businesses, households, or governments--tried to cut back on their spending and push it below income, and that unemployment fell when economic agencies tried to expand their spending and push it above income.

Paul goes on:

Meanwhile, Powerline attacks Keynesian economics, and me, because… Keynes once said something anti-Semitic.

I liked it better back in 2005, when they were ridiculing me because:

[T]here is little reason to fear a catastrophic collapse in home prices. Krugman will have to come up with something much better, I think, to cause many others to share his pessimism.

Another day in the life.

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