Robert Shiller is more generous toward the idea of expansionary austerity than I would have been, but in the end he doesn't believe that contractionary policy is expansionary:
Does Austerity Promote Economic Growth?, by Robert J. Shiller, Project Syndicate: In his classic Fable of the Bees: or, Private Vices, Publick Benefits (1724), Bernard Mandeville, the Dutch-born British philosopher and satirist, described – in verse – a prosperous society (of bees) that suddenly chose to make a virtue of austerity, dropping all excess expenditure and extravagant consumption. What then happened?
The Price of Land and Houses falls;
Mirac’lous Palaces, whose Walls,
Like those of Thebes, were rais’d by Play
Are to be let; . . . .
The building Trade is quite destroy’d
Artificers are not employ’d; . . .
Those, that remain’d, grown temp’rate strive
Not how to spend, but how to live . . .
That sounds a lot like what many advanced countries have been going through, after financial-crisis-induced austerity plans were launched, doesn’t it? ...
But how do we know if Mandeville is right about austerity? His research method – a long poem about his theory – is hardly convincing to modern ears. ...
There is no abstract theory that can predict how people will react to an austerity program. We have no alternative but to look at the historical evidence. And the evidence ... does show that deliberate government decisions to adopt austerity programs have tended to be followed by hard times.
Policymakers cannot afford to wait decades for economists to figure out a definitive answer, which may never be found at all. But, judging by the evidence that we have, austerity programs in Europe and elsewhere appear likely to yield disappointing results.