As to whether I think the government owes money the way you owe money on your house, the answer is no, and I wrote a whole book about why.

But it’s important that mainstream macroeconomists don’t think so either. The consensus in the mainstream seems to be that the optimal fiscal policy is a random walk: the government should spend what it needs to provide the ‘optimal’ level of public goods, and taxes should follow some sort of Ramsey-type ‘optimal tax’ policy. The result is that there is no discernible pattern to the budget balance of the optimal fiscal policy. It’s certainly possible for it to have frequent or even constant deficits.

The big difference with some heterodox economists, so far as I can see, concerns the role of monetary policy. Mainstreamers tend to think monetary policy works as a stabilisation tool, and should be used in that way. Heterodox types disagree, for various reasons. I don’t think mainstreamers have won that case.

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Lecturer in Philosophy, University of St. Andrews — personal website:

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