Economic policy as expectations management: Keynes’ and Friedman's complementary approaches

Sylvie Rivot

The European Journal of the History of Economic Thought, 2017, vol. 24, issue 5, 1053-1084

Abstract: We investigate how Keynes and Friedman, respectively, address the issue of the disequilibria at stake in a monetary economy through a shared concern for the formation of expectations. We show that Keynes was interested in the coordination of long-term expectations regarding non-monetary assets prospective yields, while Friedman focused on the adaptation of short-term nominal expectations. Regarding the remedies to these disequilibria, both economists called for devices that aim to stabilise market expectations. As a direct outcome, Keynes designed policies that aim to stabilise the long-term state of expectations while Friedman basically aimed at the acceleration of the competitive adjustment process.

Date: 2017
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DOI: 10.1080/09672567.2017.1323939

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