Mario Rizzo, over at ThinkMarkets, writes much good sense about Keynesian economics and fiscal “stimulus.” Here’s his penultimate paragraph:
The root of the policy problem is that the “Keynesian” solution takes the simple aggregate demand model too seriously. It proceeds as though sectoral imbalances don’t matter. In this view, the current situation is not a coordination problem but some kind of confidence problem that leads to a deficiency of demand in general. The theory is inadequate and thus so is the solution.
