It’s undeniable that the “foundations” of Keynesianism are still very much with us. They remain, in fact, the key conceptual framework through which we understand the economy, despite many dents from various Nobel-winning critics over the years. But it’s also true that there’s pretty thin evidence that a Keynesian stimulus of this size and this speed will work. Assuming the stimulus bill is passed in the coming hours, we are about to engage in a giant historical experiment. And we are the guinea pigs.
For a view from the reasonable center, I went to Harvard’s Kenneth Rogoff, the former chief economist for the International Monetary Fund and an erstwhile adviser to John McCain who has a reputation for intellectual evenhandedness—and who was prescient about the current financial crisis. “There is tremendous skepticism, both based on theory and empirical evidence, about how much good all this is going to do,” said Rogoff. “But there’s also a recognition that the situation is so dangerous it has to be tried.”