At the NYT, Bruce Bartlett derides the mainstream, Keynesian economics that prevailed in the 1970s – e.g., Paul Samuelson’s most-famous-economics-textbook-ever. Krugman thinks Bartlett is setting up a straw-man with his characterization of the Keynesian school. Lawrence White, at Division of Labor, agrees with Bartlett and offers a rebuttal. White says, in essence: Maybe they were teaching you, MIT übermenschen, a different Keynesian system. But what they were teaching undergraduates is exactly what Bartlett describes:
“Budget deficits stimulate economic growth”: We didn’t hear much about growth, but we were certainly taught that deficits raise the level of income, via the balanced-budget multiplier.
“The means by which the government raises revenue is essentially irrelevant economically”: Well, in the macro half of the course, yes.
“Government spending and tax cuts affect the economy in exactly the same way through their impact on aggregate spending”: Yes.
“Personal savings is bad for economic growth”: Certainly bad for the level of income, due to the paradox of thrift.
“Monetary policy is impotent; and inflation is caused by low unemployment, among other things.” Yep. We were never taught MV=Py.
What’s perhaps more important, is that every single one of Bartlett’s bullet points in the quote above, is exactly what most colleges and universities are still teaching their undergraduates. I was taught – at every level – the very material that Krugman claims wasn’t being taught when he was in school. I had it at community college, at university, and for a few semesters of grad school. In 2005. If the MIT (and presumably, other top-notch schools) staff knew this stuff was wrong three decades ago, how is it still being taught, anywhere?