In this corner, the saltwater economists (because they teach at schools on the coasts, i.e. Princeton, MIT, and Berkeley) who take their cues from John Maynard Keynes, with special emphasis on his views that asset prices commonly diverge from fundamental values and that fiscal policy can affect the real economy due to the slow clearing of markets. In the other corner, the freshwater economists (because they teach at schools in the interior of the country, i.e. Chicago and Minnesota) who take their cues from John Muth (but are often associated with the later views of Milton Friedman), with special emphasis on their view that asset prices efficiently represent all of the current information about the economy and that fiscal policy can only infect the real economy by interfering with the quick clearing of markets. As always, the debate is over assumptions about rationality and the speed at which markets reach equilibrium; the freshwater economists look at the current economy and see mis-allocated resources and disequilibrium while the saltwater economists survey the same situation and see creative destruction and equilibrium. Let's get ready to rumble!
Don't know where you stand? Here's a riddle (apologies to Arjo Klamer in Conversations with Economists): What do you call someone with a PhD in theoretical physics who's making you a delicious deli sandwich? If you answer "a waste," wax up your surfboard and get your endless summer on; if you answer "a sandwich artist," it's time to go wakeboarding.
Oh yeah, the cast of characters for this tag-team steel cage hardcore rules match. To keep it from being a royal rumble, I'll only go for 3
wrestlers economists on each side, although there are lots of "managers" looming ringside, just like Jimmy Hart or Captain Lou Albano:
I'll have lots more to say about this as the semester goes on...for now suffice it to say I'm blogging from the Gulf Coast.
But now the background:
Who drags in Richard Posner from outside the ring, bringing up the crucial element of how effective the stimulus is/can be.
I'm exhausted. I've got an idea. It's called UFC 103.