South By North Strategies, Ltd.

Brad DeLong is confused about the direction of economic policy.

… Today, we face a nominal demand shortfall of 8% relative to the pre-recession trend, no signs of gathering inflation, and unemployment rates in the North Atlantic region that are at least three percentage points higher than any credible estimate of the sustainable rate. And yet, even though politicians who fail to safeguard economic growth and high employment tend to lose the next election, leaders in Europe and the US are clamoring to enact policies that would reduce output and employment in the short run.
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Am I missing something here?
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I had thought that the fundamental issues in macroeconomics were settled in 1829. Back then, even Jean-Baptiste Say no longer believed in Say’s Law of business-cycle frequencies. He knew very well that a financial panic and excessive demand for financial assets could produce deficient demand for currently-produced commodities and for labor, and that while such a short-run breakdown of Say’s Law might be temporary, it was nonetheless highly destructive.