Thomas I. Palley: After the bust: The outlook for macroeconomics and macroeconomic policy

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After the bust: The outlook for macroeconomics and macroeconomic policy

21 pp.
3.70 EUR
(October 2009)

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In the chapter “After the bust: The outlook for macroeconomics and macroeconomic policy” Thomas I. Palley argues that the current economic crisis offers an historic opportunity for change. The depth of the crisis means there will likely be a policy turn in a Keynesian and even Post Keynesian direction. However, there are profound political, intellectual and sociological obstacles blocking change in underlying economic thinking, according to Palley. In particular, the economics profession and its ideology remain unreformed, with little indication of change regarding core understandings concerning labour markets, globalization, and the theory of the natural rate of unemployment. The only place where there is evidence of substantive intellectual change is attitudes toward financial regulation. These obstacles will mute the policy response to the crisis, and if a deep crisis is averted they will tend to encourage a return of the existing policies that have failed so disastrously, Palley concludes.

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