The right way to respond to financial crises is not with expansionary fiscal policy, but with policies that restore the value of private assets. And the right way to prevent financial crises in the first place is to intervene in the financial markets to moderate swings in asset values and to head off recessions before they happen.
WARWICK – The public spat between Nobel laureate Joseph Stiglitz and former US Treasury Secretary Larry Summers is remarkable for the personal animosity that it reveals between two economists who essentially agree about the economics. Stiglitz levels a not-so-subtle attack on Summers for failing to insist on a larger fiscal deficit when he ran the National Economic Council under the Obama presidency. Summers responds that the politics made a larger fiscal stimulus infeasible. But while they agree that the Great Recession could have been overcome with a big fiscal stimulus, neither has laid out the economic model that underpins their confidence in this outcome.
WARWICK – The public spat between Nobel laureate Joseph Stiglitz and former US Treasury Secretary Larry Summers is remarkable for the personal animosity that it reveals between two economists who essentially agree about the economics. Stiglitz levels a not-so-subtle attack on Summers for failing to insist on a larger fiscal deficit when he ran the National Economic Council under the Obama presidency. Summers responds that the politics made a larger fiscal stimulus infeasible. But while they agree that the Great Recession could have been overcome with a big fiscal stimulus, neither has laid out the economic model that underpins their confidence in this outcome.