Crook on Playing Nice

Referring readers to posts by Krugman and responses from Barro via email, Clive Crook at the FT has made it clear that he thinks the most damaging part of the current tête à tête over the Obama stimulus package in the blogosphere is not that it might reveal a rather serious lack of knowledge on the part of many macroeconomists when it comes to questions of prime policy relevance, but instead that it undermines public confidence in their ability to carry out a reasonable and mature debate. He points out that all too often this means that those on both the left and the right of American politics end up ignoring the arguments and stick to their dogmatic beliefs.

The email exchange with Barro in the post is a worthwhile read, and it finishes with an interesting point, particularly relevent to some of our recent classes:

One thing I think you need to be clear on is the distinction between Ricardian equivalence and Keynesian multipliers. The first bears, for example, on how a deficit-finance tax cut affects aggregate demand. The Ricardian view is no effect, and the “standard” view is that the effect is positive but less than one. The multiplier has to do with how a change in aggregate demand affects output. It is possible to have a large multiplier even with Ricardian equivalence, and it is possible to have a small multiplier even without Ricardian equivalence.