Krugman is so good on this it has to be reproduced in its entirety:
"Just a brief further thought on the anti-Keynesian flip-out. Consider three propositions:
1. Deficit spending is expansionary, other things equal.
2. Deficit spending is always expansionary.
3. Only deficit spending is expansionary.
Keynesian economics basically asserts proposition 1. Testing that proposition is tricky, but that’s always the case in economics; you have to look for natural experiments, or be very careful about controls. Christy Romer talks about this in her excellent speech (pdf) on the topic. But when you do it right, the evidence strongly supports proposition #1.
Proposition #2 is, well, stupid. It’s what you see in bad comment threads, where people rant about how if Keynesian economics was right, Greece would be a miracle economy.
And proposition #3 is worse. Which is why I am boggled to see professional economists apparently believing that this is the proposition to focus on."
At issue in 2012 or 1946 is of course the remarkably dumb proposition #3, which no Keynesian believes. Krugman probably could have added a conditional clause to #1, but I guess "other things equal" could cover most of the conditions I'd add.
The steeds of Poseidon
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