Greg Mankiw on Fiscal Policy

Just over one year ago, when "fiscal stimulus" was all the rage, I asked what I thought was a simple question: How do the proponents of fiscal stimulus know that it works? More precisely: what evidence can we bring to bear on the question of whether a large increase in government spending during a peacetime economic crisis stimulates GDP in a welfare-improving manner? (I allowed for the possibility that such a spending program may have desired redistributional aspects, but redistribution is patently not what people talk about when they speak of the benefits of fiscal stimulus--it is something that is supposed to make us all better off).

In case you're interested, you can refer to:

Does Fiscal Spending "Work?"
Believing in Fiscal Stimulus.
Believing in Fiscal Stimulus 2.

I appeared to have hit a nerve with some people on this topic. One chap named Bruce Wilder was particularly amusing (that is, if you find appalling ignorance and santimonious drivel amusing). This "debate" had the side benefit of leading me to think about a theory of religion. In any case, the record of this exchange can be found here:

Bruce Wilder on Andolfatto.
Religiousity in Macroeconomics and the Sad Case of Father Wilder.

As far as I was (am still) concerned, it all boiled down to personal beliefs (religion). There is simply not enough data (as far as I am aware of) that could lead any honest (agnostic) scientist to come down strongly on one side of the debate or the other. It led me to question to academic integrity of strong proponents of fiscal stimulus like Paul Krugman and Brad DeLong. (I do not feel quite the same way for strong opponents, as they are usually more honest about their beliefs: they simply do not want the government to interfere in the lives of its citizens, period. However, this may simply reflect a defect or bias on my part).

And then along comes Greg Mankiw, a self-described Keynesian. He recently published this in the Federal Reserve Bank of St. Louis Review: Questions About Fiscal Policy.

Mankiw is a gifted writer. I encourage you to read it. He begins the paper with a great analogy. But what I really loved was this line:

I am actually a believer in Keynesian theory; much of my research is in that field. But even as a believer in many aspects of Keynesian theory, I appreciate that you cannot approach this subject matter without showing some humility about what we, as economists, can truly be confident about.

My only quibble is why he only included economists in that worthy sentiment.

Other than that, all I have to say is:

Amen