The Fantasy of Fiscal Stimulus
It turns out Keynesian policies are correlated with slower, not faster, economic growth.
America’s economy has fully recovered from the Great Recession and is now in a boom phase. But the prevailing explanation of that recovery is not satisfactory, and neither is the understanding of the boom.
Generations of Keynesian economists have claimed that when a loss of “demand” causes output to fall and unemployment to rise, the economy does not revive by itself. Instead a “stimulus” to demand is necessary and sufficient to pull the economy back to an equilibrium level of activity.
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