As I began to think about what I might discuss today, I found myself remembering an important talk – the Harold Innis Lecture – that Doug gave at the meetings of the Canadian Economics Association in 1985 in Montréal (Purvis 1985). I was in the audience that day.
That lecture was titled “Public Sector Deficits, International Capital Movements and the Domestic Economy: The Medium-Term Is the Message.” Doug certainly held that fiscal policy was an effective tool for economic stabilization, but he drew us to a very important caveat – that stimulative fiscal policy meant government borrowing, and the accumulation of debt through that channel would one day have important side effects not captured in most macroeconomic models at the time.