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

John Nevile and Peter Kriesler
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John Nevile: School of Economics, University of New South Wales

No 2012-28, Discussion Papers from School of Economics, The 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.

Keywords: macroeconomic policy; cyclical fluctuations; money and interest; monetary policy; fiscal policy. (search for similar items in EconPapers)
JEL-codes: E00 E52 E62 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2012-04
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pke
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Journal Article: A bright future can be ours! Macroeconomic policy for non-eurozone Western countries (2014)
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