Steven Pearlstein has a very nice profile of Olivier Blanchard, a world-class macroeconomist who went on to become an even more towering figure as chief economist at the IMF. (Full disclosure: Olivier and I were in grad school together — we worked out the analytics of anticipated shocks on the lunchroom table together — then were colleagues at MIT for many years.) Under Olivier’s leadership the IMF research department became a huge source of important work that was both intellectually bracing and extremely relevant to policy. And I thought I might add a bit to the profile by talking briefly about one line of that work, the IMF’s ground-breaking empirical analysis of fiscal policy.

Back in early 2010 policymakers in Europe, and some politicians in the United States, went all in for the notion of “expansionary austerity”, the belief that slashing spending in a depressed economy would actually increase demand by inspiring confidence. This view was allegedly supported by statistical evidence, although it was fairly obvious that this evidence was weak, that the statistical procedures being used to identify episodes of austerity and stimulus didn’t actually work. But the world badly needed a careful examination of the facts.

The IMF delivered, showing that the measures of austerity used in expansionary austerity papers were indeed badly flawed; the Fund used actual changes in policy, and found that austerity has indeed been contractionary.

How contractionary? Initial estimates suggested a multiplier of around 0.5, and that’s what the Fund went with in much of its policy analysis, even though many of us warned from the beginning that the multiplier was probably much larger with interest rates at the zero lower bound. When the slumps in debtor countries proved much deeper than forecast, Blanchard and colleagues, enormously to their credit, revisited the issue and concluded that they had understated the adverse effects of fiscal contraction. This was a wonderful thing to see, especially in a world where almost nobody ever admits having been wrong about anything. And it came in time to have a useful effect on policy, if policymakers had listened, which they didn’t.

But doesn’t government spending crowd out investment, so that austerity may be bad in the short run but good in the long run? No, said the IMF in yet another crucial analysis, which said that fiscal policy appears to produce crowding in, not crowding out — an economy weakened by austerity will invest less, not more.

And there’s more, like the IMF’s use of interwar data to assess the chances for successful debt reduction via austerity. (Not good.)

I’m sure I’m missing stuff. But the point should be clear: the Blanchard era at the IMF was one of unprecedented data-driven analysis of policy problems, done with consummate skill.