Keynesians on Uncertainty II

Also recall the Taylor paper that Taylor promoted as being against stimulus but everyone realized -when they read it - actually said we needed more stimulus for it to work? That paper had important discussions of uncertainty too (Taylor is a New Keynesian, btw), and Krugman highlighted the uncertainty discussion to his readers and made sure to note that it was different from the uncertainties that Republicans (and libertarians worry about).

Taylor Rules, Paul Krugman, December 7, 2011

"Via Mark Thoma, Noah Smith reports on a conference held at Hoover in which right-wing economists reached right-wing conclusions. Surprise!

But what’s really remarkable, and what I find a bit shocking even after all we’ve been through, is the way John Taylor misrepresents other peoples’ work. Reading Taylor’s summary, you’d think that Bloom, Baker and Davis had showed that fear of Obama was holding the economy down; if you actually read their paper, while they do conclude that “uncertainty” is an important factor, the biggest sources of uncertainty are Republican brinksmanship over the budget, the situation in Europe, and the legal challenges to health care reform. Not exactly what the GOP ordered.

Worse yet, Taylor makes it seem as if Bob Hall showed that fiscal expansion is ineffective. Yet if you have actually been following Hall — which I have, carefully — you’d know that he has been producing extensive evidence that fiscal expansion does, indeed, work; he argues (pdf) that the

Obama stimulus made the slump considerably less severe. His complaint is that the stimulus wasn’t big enough — which is the same argument I made from the beginning."