In a comment below, this guy said:
Normal economists worry about the fact that deficits lead to inflation or higher taxes. Neither’s good. Normal economists care about the so-called multiplier in which government expenditures magically increase GDP by a multiple of their value. Normal economists have measured the multiplier and found it to be close to 1, i.e. there is no magic.
Krugman’s basically argues we’re not in normal times so all those normal results don’t apply. We’re living with so-called “depression economics”. With lack of sufficient evidence about what happens with government expenditures in abnormal times — depressions are relatively rare— we’re just suppose to believe Krugman’s conjectures are right. Also, he ignores the few data points we do have and that are contrary to his conjectures, e.g. the fact that Japan had been stimulating the crap out of its economy during its “lost decade” or the fact that when Roosevelt fixed monetary policy the economy started recovering from the Depression (i.e. fiscal stimulus doesn’t do much).
Krugman and team social democrats want a “green economy” and they want nationalized medicine. This crisis has people crying for government to do something. Using Krugman’s depression economics as psuedo-intellectual backing, social democrats have a political window to bring those things about.
As political cover, “depression economics” is brilliant. As a scientific theory, Krugman’s conjectures have little going for them.
Can we all agree that after we’ve spent a few trillion on “green” industries and we’ve got nationalized medicine, we can throw Krugman’s “depression economics” out with the rest of the scientific trash? There’s no solid theory, the evidence for its conjectures is weak at best and there’s not systematic way to test it. The only reason economists are even talking about it is because a prominent social democrat just won the economics Nobel and not because its an idea with merit.
“Depression economics” is brilliant politics… as is mercantilism and nativism. That which politicians use to prey on the ignorance of the masses doesn’t make for interesting topics of scientific economic inquiry.