The fundamental issues in the controversy of the policy paradigms: Policies, theories, and underpinnings

Mark Perlman

No 305, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Whether or not paradigm (1), as a word, is or is not an overstatement, in this essay I will identify the differences between and the sources of two policy programs. From the journalistic (popular) standpoint, policy differences stand out most vividly when programs are compared. But often the real differences lie at the underpinnings. What are these underpinnings? Are they at the theory level (where most economists generally believe such matters start), or do they appear, as I believe, long before particular theories are selected and examined? Should one dispense with opening the examination at the theoretical level? Indeed, is the study of where to start (at the level of policy, at the level of theory, or even deeper) really the economist's problem? Had this better be left to methodologists and philosophers? I think not (2). I undertake a different course and suggest that we start not with the theories but with the consideration of two policy programs, which I will try to synthesize. Thereafter, I will use personal nouns to describe the theoretical tents housing these policies. Finally, I hope that we can agree on looking at the ground where the underpinnings are anchored. In so doing, I find myself in good methodological company. Hayek, for one, endorses this method (1). I term my two basic policy groups the Kiel-Schumpeter Policy Set and the Principal Keynesian Policy Set. The former I associate with the views of Herbert Giersch, although he has repeatedly suggested that he got them from his reading of the works of Joseph A. Schumpeter. The latter, as the concept is expressed, draws more than a little from Alan Coddington's metaphor, the Hydraulic Keynesians [Coddington, 1976, pp. 1263-1267].

Date: 1988
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