But as Austerity’s authors show, in some cases austerity was expansionary. And, in large part, it happened for exactly the reason Krugman denigrated. Where austerity is based on spending cuts rather than tax increases, “private investment rises within 2 years,” and by the third year is above the previous level. Contra Krugman, Alesina, Favero, and Giavazzi attribute this to increased business confidence.
We have a new book:
A new book written by economists Alberto Alesina, Carlo Favero, and Francesco Giavazzi titled, "Austerity: When It Works and When It Doesn’t."
Krugman never mentions steps two, his hidden MMT plot he calls the Hicks shift. His expectation function implicitly assumed a rebalance, a new monetary cycle. But, it is a secret, he is not supposed to tell anyone.
Not any more, we all know the game and will be at the MMT meetup. AOC will be leading the charge unless Krugman's favorite candidate starts telling the truth.
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