Some of you may recall that Paul Krugman referred to Robert Barro’s analysis of the multiplier associated with World War II spending as “boneheaded.” Admittedly, I did agree with Krugman to the extent that the period in question is not ideal for such measurement given the variety of other simultaneous changes (e.g. price controls, rationing, etc.). Nonetheless, I did acknowledge that “Robert Barro essentially wrote the book on government from a macro perspective.” Further, Barro’s analysis was not “boneheaded”, but merely less than ideal.
Now over at The Atlantic, there is an excellent interview with Robert Barro where he discusses the stimulus package, his analysis, and Krugman. First, in response to Krugman:
He said elsewhere that it was good and that it was what got us out of the depression. He just says whatever is convenient for his political argument. He doesn’t behave like an economist. And the guy has never done any work in Keynesian macroeconomics, which I actually did. He has never even done any work on that. His work is in trade stuff. He did excellent work, but it has nothing to do with what he’s writing about.
This is probably the worst bill that has been put forward since the 1930s. I don’t know what to say. I mean it’s wasting a tremendous amount of money. It has some simplistic theory that I don’t think will work, so I don’t think the expenditure stuff is going to have the intended effect. I don’t think it will expand the economy. And the tax cutting isn’t really geared toward incentives. It’s not really geared to lowering tax rates; it’s more along the lines of throwing money at people. On both sides I think it’s garbage. So in terms of balance between the two it doesn’t really matter that much.
Read the whole thing.