Fiscal Policy: Why Aggregate Demand Management Fails and What to Do about It
AbstractThis paper argues for a fundamental reorientation of fiscal policy, from the current aggregate demand management model to a model that explicitly and directly targets the unemployed. Even though aggregate demand management has several important benefits in stabilizing an unstable economy, it also has a number of serious drawbacks that merit its reconsideration. The paper identifies the shortcomings that can be observed during both recessions and economic recoveries, and builds the case for a targeted demand-management approach that can deliver economic stabilization through full employment and better income distribution. This approach is consistent with Keynes's original policy recommendations, largely neglected or forgotten by economists across the theoretical spectrum, and offers a reinterpretation of his proposal for the modern context that draws on the work of Hyman Minsky.
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Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_650.
Date of creation: Jan 2011
Date of revision:
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Web page: http://www.levyinstitute.org
Labor Demand Targeting; Aggregate Demand Management; Full Employment; Income Inequality; Poverty;
Find related papers by JEL classification:
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-MAC-2011-01-30 (Macroeconomics)
- NEP-PKE-2011-01-30 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- L. Randall Wray & Stephanie A. Bell, 2004.
"The 'War on Poverty' after 40 Years: A Minskyan Assessment,"
- Stephanie Bell & L. Randall Wray, . "The War on Poverty After 40 Years: A Minskyan Assessment," Economics Public Policy Brief Archive ppb_78, Levy Economics Institute.
- Stephanie Bell & L. Randall Wray, 2004. "The "War on Poverty" after 40 Years: A Minskyan Assessment," Economics Working Paper Archive, Levy Economics Institute wp_404, Levy Economics Institute.
- Lesley J. Turner & Sheldon Danziger & Kristin S. Seefeldt, 2006. "Failing the Transition from Welfare to Work: Women Chronically Disconnected from Employment and Cash Welfare," Social Science Quarterly, Southwestern Social Science Association, Southwestern Social Science Association, vol. 87(2), pages 227-249.
- Pavlina R. Tcherneva, 2012. "Permanent On-The-Spot Job Creation—The Missing Keynes Plan for Full Employment and Economic Transformation," Review of Social Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 70(1), pages 57-80, September.
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