Over the last few months I have had a chance to closely examine many of Krugman’s recent and past writings on fiscal and monetary policy. One thing that I notice is that Krugman is very skilled at making an argument. He can use the same basic model to make either monetary or fiscal policy seem like the only reasonable option. All that is required is that one tweak the assumptions in such a way that the less favored policy seems either undesirable or infeasible. So my message is this—don’t let anyone (including me) bully you into thinking that your policy instincts are wrong, until you have closely examined the assumptions that underlie each side of the debate. All this drivel in the blogoshere about velocity, multipliers, liquidity traps, Ricardian equivilence, budget constraints, etc, etc, are merely verbal tools that can be wielded to achieve any desired outcome. It’s an insiders game. The real battle is elsewhere.
Scott Sumner on Krugman