Invoking Irving Fisher
By Arnold Kling
In 1933, Fisher held out some hope that fiscal policy might be helpful in dealing with excessive debt, but within several years he had completely rejected the Keynesian view. By 1940, Fisher had firmly stated to FDR in several letters that government spending of borrowed funds was counterproductive to stimulating economic growth. Significantly, by 2011, Fisher’s seven decade-old ideas have been supported by thorough, comprehensive and robust econometric and empirical analysis. It is now evident that the actions of monetary and fiscal authorities since 2008 have made economic conditions worse, just as Fisher suggested.
Hunt is speaking within an AS-AD framework. He invokes Irving Fisher as suggesting that fiscal and monetary policy cannot overcome heavy indebtedness. Why not? The essay offers tantalizing hints, but does not explain to my satisfaction. Still, worth reading.