LOOKING BACK AT THE QUESTION: “WHAT WOULD KEYNES DO”? The caption for my post on December 3, 2008 (less than three months after the Lehman bankruptcy) was “WHAT WOULD KEYNES DO”? The first sentence was: “Kids, in times of financial crisis, we find ourselves turning to Bagehot and Keynes.” At the end of the post, I agreed with Professor Krugman’s recommendation: “The answer, almost surely, is good old Keynesian fiscal stimulus.” Keynes wrote over 70 years ago. And so, Nick, I am saying that this is another old idea from a very wise man, and it is the right move.”
I take some pride that ten years later a large fiscal stimulus has been accompanied by a dramatic increase in employment (or, using a related measurement, a dramatic reduction in the rate of unemployment).
Of course, I was agreeing with Professor Krugman just as I had agreed with Bagehot and Keynes.