Austerity Theory Takes a Hit

A spreadsheet mistake in widely referenced 2010 academic paper may have rendered many European policy makers farblondget, for want of a better word — that’s Yiddish for completely lost. That at least would be the conclusion of many economists, Paul Krugman probably the most well-known among them, who have maintained all along that the way to economic recovery is stimulus and at least for the nonce, more debt. The flawed academic paper had been grist for European austerity advocates and many in the United States as well, including Paul Ryan. It’s a dramatic turn in what is proving to be the macro-economic debate of our time. Here’s the take from The Economist .