economics and interest rates

I have no idea if JW Mason is right here:

In general, I do think the secular stagnation conversation is a real step forward. So it's a bit frustrating, in this context, to see Krugman speculating about the "natural rate" in terms of a Samuelson-consumption loan model, without realizing that the "interest rate" in that model is the intertemporal substitution rate, and has nothing to do with the Wicksellian natural rate. This was the exact confusion introduced by Hayek, which Sraffa tore to pieces in his review, and which Keynes went to great efforts to avoid in General Theory. It would be one thing if Krugman said, "OK, in this case Hayek was right and Keynes was wrong." But in fact, I am sure, he has no idea that he is just reinventing the anti-Keynesian position in the debates of 75 years ago. 

The Wicksellian natural rate is the credit-market rate that, in current conditions, would bring aggregate expenditure to the level desired by whoever is setting monetary policy. Whether or not there is a level of expenditure that we can reliably associate with "full employment" or "potential output" is a question for another day. The important point for now is "in current conditions." The level of interest-sensitive expenditure that will bring GDP to the level desired by policymakers depends on everything else that affects desired expenditure -- the government fiscal position, the distribution of income, trade propensities -- and, importantly, the current level of income itself. Once the positive feedback between income and expenditure has been allowed to take hold, it will take a larger change in the interest rate to return the economy to its former position than it would have taken to keep it there in the first place. 

There's no harm in the term "natural rate of interest" if you understand it to mean "the credit market interest rate that policymakers should target to get the economy to the state they think it should be in, from the state it in now."And in fact, that is how working central bankers do understand it. But if you understand "natural rate" to refer to some fundamental parameter of the economy, you will end up hopelessly confused. It is nonsense to say that "We need more government spending because the natural rate is low," or "we have high unemployment because the natural rate is low." If G were bigger, or if unemployment weren't high, there would be a different natural rate. But when you don't distinguish between the credit-market rate and time-substitution rate, this confusion is unavoidable.

DeLong and Mason tweet on subject