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Mainstream Economics Compared To Keynesian Times

Summary:
Paul Krugman has endorsed an article by Jason Furman and Lawrence Summers on fiscal policy. It has a mix of pre-Keynesian orthodoxy and the Keynesian thinking of the 40s.The economics profession got it wrong on fiscal policy, claiming it is impotent for raising real output and is now making it look like they already knew this.For comparison, here’s Nicholas Kaldor, free of all pre-Keynesian orthodoxies:It is impossible to judge intelligently the system of taxation, or the scale of public expenditures, without a quantitative record of the total economic activity of the nation, which forms the background. This is perhaps even more important in war-time, when the Government controls so much larger a part of the national income; but it is vital in peace-time as well. If a statement of this

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Paul Krugman has endorsed an article by Jason Furman and Lawrence Summers on fiscal policy. It has a mix of pre-Keynesian orthodoxy and the Keynesian thinking of the 40s.

The economics profession got it wrong on fiscal policy, claiming it is impotent for raising real output and is now making it look like they already knew this.

For comparison, here’s Nicholas Kaldor, free of all pre-Keynesian orthodoxies:

It is impossible to judge intelligently the system of taxation, or the scale of public expenditures, without a quantitative record of the total economic activity of the nation, which forms the background. This is perhaps even more important in war-time, when the Government controls so much larger a part of the national income; but it is vital in peace-time as well. If a statement of this kind had been presented year by year, simultaneously with the Budget, many financial mistakes of past Governments might have been avoided.

Moreover, the regular publication of this document would stimulate both Government and Parliament to look upon the level and the stability of the National Income, rather than the conventional and narrowly financial standards, as the true criterion of budgetary policy; to regard the movements of the national expenditure, and not merely of the expenditures of public departments, as within their province. It is on the assumption of this wider responsibility that our best hope lies for the post-war world.

Nicholas Kaldor, The White Paper On National Income And Expenditure, 1941

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