I read this piece by Robert Barro in the WSJ shrugging my head in distrust over macro-economists and their analysis. To understand what I mean, contrast this piece with this one by Krugman written in January http://www.nytimes.com/2010/01/18/opinion/18krugman.html
The real moral of the story here is that there will always be a very reputable and leading economist to support whatever position one wants to take on a macro economic issue. Why is that? The answer lies in the number of assumptions one needs to make without much hedging backup to come to any prescription.
From the distance of BICs master obsessed with being able to hedge probabilistic assumptions, I was tinged by:
- the widespread assumption that multipliers used are fixed quantities,
- Wildly speculative sentences such as "...second, this multiplier provides a reasonable gauge (and likely an upper bound because of the strong wartime boost to labor supply due to patriotism) for the effects of nondefense government purchases.".
- I did not see any inflationary discount when adding up the numbers.
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