This is was quite bizarre. Brad De Long writing a downright vicious attack on Steve Horwitz, accusing him of being "out of date" with his macroeconomics, only to real off textbook wisdom circa 1970. De Long's response:
We haven't seen any fall in government bond prices associated with the stimulus. We haven't seen any rise in wage inflation associated with the stimulus.
If only it was that simple! Reasons why De Long is wrong:
- Aggregation
- Counterfactual space
- Heterogeneity
Call it a cop out but I won't expand on those points right now. Regular readers and students should know what they mean. The fact that most economists might require further explanation, says everything. See discussion thread here.
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