Friday, February 26, 2016

Peter Dorman — Romer^2 on Friedman on Sanders

Oh dear. Today's Romer and Romer response to Gerald Friedman’s paper on the economic consequences of Sanders seems to have identified the core problem in GF’s analysis, confusing one-time and ongoing stimulus effects. According to the R team, F attributed increases in economic growth in perpetuity to single bursts of stimulus, and not just once but repeatedly—in his treatments of demand stimulus, income redistribution and health care. That plus his belief that the output gap is large enough to accommodate extremely rapid growth over a full decade, explains his headline numbers. If this is true it’s an embarrassment.…
Romer^2 on Friedman on Sanders
Peter Dorman | Professor of Political Economy, The Evergreen State College

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1 comment:

Calgacus said...

I would trust Friedman's multipliers more than C Romer's- this paper asserts as a matter of course that the longterm effect of major, temporary fiscal spending now is approximately zero, because of neoclassical magic I guess. Yeah, right. Her work on the Great Depression (misunderestimating the multipliers) was ably refuted, as using one of the defective theories of "business economists" - before she was born, by Lauchlin Currie in his memorandum to FDR on the causes of the Roosevelt Recession.