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A Bright Future Can Be Ours! Macroeconomic Policy for Non-Euro-Zone Western Countries

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Author Info

  • John Nevile

    (School of Economics, University of New South Wales)

  • Peter Kriesler

    (School of Economics, University of New South Wales)

Abstract

Radical changes in macroeconomic policy could produce a brighter future. The neoclassical myth that a free-market economy inevitably moves to an equilibrium position determined solely by supply-side factors must be rejected and replaced by the insight that the position of an economy in the longer-run is path-dependent. Fiscal policy in recessions should be biased towards increasing physical and human capital which will improve the productivity of an economy, raising living standards and hence taxable capacity, thus enabling future public debt to be reduced if this is desirable. Monetary policy should play a very minor role in aggregate demand policy, with interest rate settings largely used to help achieve long-term income distribution goals. All this is fundamental to Geoff Harcourt’s vision of macroeconomic policy and this paper spells out how this vision can be implemented in 2012 in Western countries not hamstrung by Euro-zone rules and regulations.

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File URL: http://research.economics.unsw.edu.au/RePEc/papers/2012-28.pdf
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Bibliographic Info

Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2012-28.

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Length: 17 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:swe:wpaper:2012-28

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Keywords: macroeconomic policy; cyclical fluctuations; money and interest; monetary policy; fiscal policy.;

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  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "The Forgotten History of Domestic Debt," NBER Working Papers 13946, National Bureau of Economic Research, Inc.
  2. Thomas Palley, 2007. "Asset-based Reserve Requirements: A Response," Review of Political Economy, Taylor & Francis Journals, vol. 19(4), pages 575-578.
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