The debate between Joseph Stiglitz and Lawrence Summers
In this BigPicture debate, Joseph E. Stiglitz argues that Summers’s theory has been invalidated by the effectiveness of today’s fiscal stimulus policies – and that the Obama administration should have doubled down on them when it had the chance.
Summers responds that Stiglitz has mistakenly framed his theory as a passive justification of the status quo, rather than as a call to arms for precisely the type of intervention Stiglitz himself advocates. Stiglitz counters that the shape and size of the intervention matters as much as the decision to go through with it, and hopes that the right lessons will have been heeded by the next downturn. And Summers offers his final thoughts on the matter, noting that the Obama-era stimulus package did indeed fall within the range Stiglitz had prescribed at the time.
And in a commentary following the debate, Roger E.A. Farmer weighs in to argue that both Summers and Stiglitz would still need a new economic model to justify a fiscal expansion as the default response to the next recession.