Monday, January 7, 2013

Murphy on Expansionary Austerity

Murphy's survey of the recent economic literature on fiscal policy (HT EconLog's Henderson) is obligatory reading in the midst of the current economic cacophony and dogmatic drivel:
Contrary to the claims of some of today's proponents of both deficit spending and increases in the highest income tax rates, there is a large literature on the historical success of supply-side economics and fiscal austerity based on cuts in government spending. Although the findings of the relevant research are not unanimous, the case for Keynesian pump-priming is not as solid as some of the Keynesians claim. Indeed, in the cases of Paul Krugman and Christina Romer, their own past academic work shows why.

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