Thread by @jasonfurman

When economists frame a non-consensus view as obviously correct economics (or even worse "arithmetic"). It devalues the currency of consensus economic views. Take a stand and defend it, just don't claim obvious truth. Eg, @caseybmulligan on fiscal policy. nationalreview.com/2020/10/paul-k…

Casey argues UI and other transfers do not increase total demand because we cannot simply count the additional spending associated with them without also counting "the spending (both consumption and investment) of those who finance the government."

The CARES Act was not paid for w/ current tax increases. @caseybmulligan knows that but appears to be arguing in support of "Ricardian equivalence"--that it will be paid for by future tax increases & rational people anticipating those will cut back on their spending now.

Robert Barro developed this theory, it is perfectly coherent, and follows from a set of assumptions (like people know they will have more taxes in the future so save up now to pay for them and care about future generations etc.) dash.harvard.edu/bitstream/hand…

But you can't pretend it is "pesky arithmetic" or even a consensus economic view. If anything, the broad agreement in economics based on theory/evidence is the opposite. Keynes advanced an alternative model in which spare capacity & inadequate spending form a vicious circle.

For a recent formalization in the context of transfers see this paper by Hyunseung Oh & @R2Rsquared. The thinking in this paper benefits from Barro's challenge and is precise about where it makes different assumptions that lead to different conclusions. sciencedirect.com/science/articl…

Moreover, assuming nonzero and often large multipliers for transfers is standard in economics textbooks, CBO, the Fed and others, all of whom have large multipliers on transfers in their models. cbo.gov/sites/default/…

Finally, the IGM Booth survey polled about 80 leading economists from across the political spectrum and they generally agreed with a statement that was even stronger than the fact that multiplier on transfers is greater than zero. igmchicago.org/surveys/stimul…

Again, I have no problem with @caseybmulligan having an alternative view, just him describing his view as deriving from "arithmetic" as opposed to, say, "arithmetic plus the assumption that people will save more today to help their grandchildren afford their higher tax bills".

(As an aside, @caseybmulligan also argues that it will 100% crowd out lending to the United States. This argument is in tension with the Ricardian view which says there is no crowding out. It is also in tension with the assumption @caseybmulligan made in the tax debate.

Moreover, 100% crowd out is not the view that is taught in economics textbooks. The existence of any crowd out when interest rates are at the zero lower bound is implausible. In fact, crowd in may be more plausible.) See journals.uchicago.edu/doi/10.1086/65…

I care about the above in part because I care about the substance of this issue--I have a more mainstream view that transfers are good both to protect people in hard times and also to increase aggregate economic activity. That is a vital debate right now.

I also care because there are issues that all economists agree on, including ones that are "arithmetic" (e.g., you can't simultaneously increase net capital flows into the United States and reduce trade deficits). I want people to believe us when we make those arguments.