John Cochrane & Paul Krugman

I enjoyed John Cochrane’s recent response to Krugman’s long essay in the NYT. Bryan Caplan links to the articles and a chunk of Cochrane’s paper here:

http://econlog.econlib.org/archives/2009/09/cochranes_polit.html

From his rebuttal to Krugman:

Krugman is trying to say that a cabal of obvious crackpots bedazzled all of macroeconomics with the beauty of their mathematics, to the point of inducing policy paralysis.  Alas, that won’t stick. The sad fact is that few in Washington pay the slightest attention to modern macroeconomic research, in particular anything with a serious intertemporal dimension.  Paul’s simple Keynesianism has dominated policy analysis for decades and continues to do so. From the CEA to the Fed to the OMB and CBO, everyone just adds up consumer, investment and government “demand” to forecast output and uses simple Phillips curves to think about inflation.  If a failure of ideas caused bad policy, it’s a simpleminded Keynesianism that failed. [emphasis mine]