Brad DeLong: Why this is the case I do not know. I am trying to think about it…It is an important question and commenters are invited to try to help Brad. I try after the jump.
So why is the Keynes-Friedman-Samuelson position unstable ? I note that on the questions of public policy where they all agreeed, I tend to agree with them. However, I definitely do not believe in the neoclassical synthesis as described by Stiglitz. I don’t think that, even given full employment, markets are efficient. I tend to advocate leaving the market alone except for 1) redistribution from rich to poor 2) mandatory insurance is market insurance is prevented by the adverse selection death spiral 3) Pigouvian taxes to internalize externalities 4) aggregate demand management 5) Anti discrimination legislation and 6) I’m sure there are lots of other exceptions which don’t come to mind.
But that’s because I think the market is the worst possible way to organize economic interactions except for all of the others that have ever been invented. My inclination to leave markets along (except for 1-6) is based on mistrust of the state not trust in markets. I am sure that meddling will lead to interest group gridlock, advantages for the well connected (that is rich) captured regulators and so forth and so on.
So I have purely pragmatic reasons to consider aggregate demand management better than many other interventions.....Angry Bear
Thoughts on Brad’s Thoughts on Economic Theology
Robert Waldmann
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