by Mario Rizzo
Brad DeLong thinks that, under present circumstances, the crowding out of private expenditure by fiscal stimulus is not a live issue. The basic argument is that since neither average wages nor interest rates have risen in response to stimulus, no resources are being diverted from private to public uses.
I am unsure what the standards of good analysis are among Keynesian macroeconomists, so I proceed with some trepidation. However, as readers of this blog will know, I am unhappy with the level of macro-aggregation usually practiced by both Keynesian and new-classical macroeconomists. So I want to disaggregate the analysis a bit. Continue reading