Magneto Muddles, by Paul Krugman, in NY Times: Brad DeLong is baffled by Jeff Sachs, and so am I. Sachs is opposed to fiscal stimulus; I get that. But his argument is a series of non sequiturs. Unfortunately, those same non sequiturs play a fairly significant role in policy debate.
Leave aside the complete straw man mischaracterization of Keynesian views. As far as I can tell, the Sachs-and-others argument comes down to the claim that we must not seek to remedy a shortfall in demand because the economy has long-term structural problems.What sense can this possibly make?
Consider the extended version of the “magneto trouble” metaphor I use in my recent book. Keynes argued that the Great Depression could be thought of as a failure in the car’s electrical system; so let’s think of it as a situation where your car won’t run because it has a dead battery — that is, you could get it running again with a fairly trivial and easy intervention: just buy a new battery, which costs only a tiny fraction of the expense of a new car.
In saying this I am not denying that there may be other problems with the car, perhaps even big ones. Maybe it needs new brakes, or a new transmission, and these had better be dealt with soon.
Still, what sense can it possibly make to say that therefore you shouldn’t start by replacing that dead battery?
I really don’t get it.