by Dirk Ehnts, Econoblog101
While cleaning up my home office I found some old goodies, among them the paper with the title “The Reincarnation of Keynesian Economics” by Gregory Mankiw from 1991 published at NBER.
Here is an extract:
Keynesian Proposition #3: Capitalist economies are threatened by the possibility of excessive saving, which could lead to secular stagnation: deficit spending is, therefore, good for the economy.
The author should be congratulated since secular stagnation is all the rage in today’s mainstream economics, and many economists argue for deficit spending. However, the full quote from the Mankiw paper reads (my highlighting):
Dubious Keynesian Proposition #3: Capitalist economies are threatened by the possibility of excessive saving, which could lead to secular stagnation: deficit spending is, therefore, good for the economy.
Mankiw continues his attack on this proposition and finds that: “Few economists today believe that excessive saving threatens the economy”. I spare you the rest of the paper, but the lesson should be clear: economists are human, they make mistakes. It is the task of today’s economists to find out where they went wrong and then to rebuild economics to provide guidance for economic policies that are to the benefit of society. There is no need to crucify economists like Mankiw (why should anyone to that anyway?), it is time for the discipline to move on.
