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Robert Barro: Redemption

Robert Barro: How to Really Save the Economy

I went in pretty hard on the guy not too long ago, perhaps unfairly so. This article he wrote is much better than the last intellectual handjob he handed into the WSJ.

I like his acknowledgement of uncertain expectations having a primary role in the current depressed level of investment… and by “like”, I mean I think he is right. I also like his brave ideas for the elimination of the corporate income tax and the instatement of a general consumption tax (VAT).

And then he really makes me smile when correctly points out what Keynes said about investment: it is the main driver of sustainable economic growth, not consumption. I’m going to have to go back and reread the aforementioned WSJ article, I might have missed something but it almost seems like they were written by two different people (wouldn’t be surprised if it is the result of ideologically driven editing by Murdoch’s flagship).

I disagree (strongly) with him that what we need now is a (strong) dose of austerity, but I agree with him that “it will not work to announce a new $450 billion jobs plan while promising vaguely to pay for it with fiscal restraint over the next 10 years”. We need a much larger, and much more well-targeted, stimulus plan than the one Obama announced last Thursday.

So for now I’d like to issue an apology to Barro for calling him a dinosaur and ideologue. He has actually been a point of inspiration for me, as I have recently been working on a project putting Keynes’s General Theory into language that an undergrad or even high school student would find more accessible. I wouldn’t have felt compelled to do if I did not feel like so many people were misinterpreting or misreading Keynes, a category of people into which I perhaps incorrectly included Prof. Barro.

Categories: Economics
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