The big debate now among economists is whether countries should opt for stimulus or austerity, but neither provides the answer, says Charles Wolf, distinguished chair in international economics at the Rand Corp.

That's because both prescriptions ignore the private sector, he says in The Wall Street Journal.

"Why is it that in the United States the 'stimulus' solution to the economy's ills has performed badly, while in Europe the opposite approach, 'austerity,' has performed even worse?" he writes.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

"The answer is that austerity ... or stimulus ... will promote growth only in some countries and in some circumstances. Whether either policy will work depends critically on the responses of the private sector."

And both European and the United States policymakers have ignored this factor, Wolf says.

In the United States, "debt-financed government spending in the present may require higher taxes in the future, thereby motivating companies and households to save rather than invest or spend," he explains.

"Another impediment is the quandary created for business plans because of uncertainty about where and how stimulus would affect each firm's markets and those of its competitors —uncertainty that is magnified when stimulus is accompanied by profuse, costly and ambiguous regulations."

And finally, U.S. companies have decided to invest more overseas, instead of sticking to the United States, Wolf notes.

In the European Union, "Austerity ... has imposed simultaneous as well as severe spending cuts on both the government and the private economy, thereby reducing opportunities for either one to cushion the adverse impact of austerity on the other. The EU's private businesses also seem less enabling of entrepreneurship and innovation that could facilitate adjustment to austerity," he adds.

Meanwhile, economists Lawrence Summers of Harvard and Brad DeLong of the University of California, Berkeley, recently proposed in a paper that given today's near-record-low interest rates, government spending would basically pay for itself, The New York Times reports.

Their thinking presumably is that the added economic growth created by the stimulus would in turn create enough tax revenue to compensate for the addition in government debt.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown