Economics

"But I have an uncomfortable feeling that this prosperity isn't something on which we can base our hopes for the future. No nation in history has ever survived a tax burden that reached a third of its national income. Today, 37 cents our of every dollar earned in this country is the tax collector's share, and yet our government continues to spend 17 million dollars a day more than the government takes in. We haven't balanced our budget 28 out of the last 34 years. We've raised our debt limit three times in the last twelve months, and now our national debt is one and a half times bigger than all the combined debts of all the nations in the world. We have 15 billion dollars in gold in our treasury; we don't own an ounce. Foreign dollar claims are 27.3 billion dollars. And we've just had announced that the dollar of 1939 will now purchase 45 cents in its total value."

"Surging budget deficits have been driving the debt, and the CBO only expects that to get worse. The agency forecasts a $1.6 trillion shortfall in fiscal 2024 — it is already at $855 billion through the first seven months — that will balloon to $2.6 trillion by 2034. As a share of GDP, the deficit will grow from 5.6% in the current year to 6.1% in 10 years. “Since the Great Depression, deficits have exceeded that level only during and shortly after World War II, the 2007–2009 financial crisis, and the corona­virus pandemic,” the report stated. In other words, such high deficit levels are common mostly in economic downturns, not the relative prosperity that the U.S. has enjoyed for most of era following the brief plunge after the pandemic declaration in March 2020. From a global perspective, European Union member nations are required to keep deficits to 3% of GDP."

"In 1931 more than forty countries had been on the gold standard; by 1937 virtually none were. Both the United Kingdom and then the United States, the two anchors of the international monetary system, were forced to float their currencies, allowing their central banks to focus on lowering domestic interest rates without worrying about how changes in their gold reserves or capital flows would affect the exchange rate. At the same time, government deficits rose, as a result of increased public spending and collapsing revenues; this happened well in advance of the breakthrough in economic theory represented by Keynes's General Theory of Employment, Interest and Money (1936), though only two countries ran deficits sufficiently large to provide an economic stimulus."

"When I look back, it seems so have all begun, nearly thirty years ago, with an essay on “Economics and Knowledge” in which I examined what seemed to me some of the central difficulties of pure economic theory, Its main conclusion was that the task of economic theory was to explain how an overall order of economic activity was achieved which utilized a large amount of knowledge which was not concentrated in any one mind but existed only as the separate knowledge of different individuals. But it was still a long way from this to an adequate insight into the relations between the abstract rules which the individual follows in his actions and the abstract overall order which is [thereby] formed....It was only through a reexamination of the age-old concept of freedom under the law, the basic conception of traditional liberalism, and of the problems of the philosophy of the law which this raises, that I have reached a tolerably clear picture of the nature of the spontaneous order of which liberal economists have so long been talking."

"The only way you can finance a deficit is by inflation. You cannot raise this amount of money by genuine borrowing. You borrow from the banks, which create credit for the purpose. A large government deficit is a certain way to inflation."

"A budget deficit occurs when the government spends more than the revenue it collects. Currently, the US government is running a $1.5 trillion budget deficit, according to Treasury Department data. The nonpartisan Penn-Wharton Budget Model projects it will increase to $2.1 trillion by 2034 if the status quo is maintained. The size of the deficit has big implications for Americans. The higher the deficit, the riskier it becomes to hold US debt, which tends to grow when the deficit does. As a result, the government could have to pay higher interest rates to borrow money. That can reduce the amount of investment in other programs the government can make. Higher interest rates on government debt, typically sold off in bonds and Treasury notes, could also cause borrowing costs to increase for Americans since the interest rates are connected to interest rates paid to invest in government debt."

"The dilemma of a socialized system is that the information flow overwhelms a centralized system if it is open to new ideas and data, that closing the system and forcing the plan to work forecloses alternatives and risks unhedged mistakes, and that decentralizing without real markets poses the problems discussed by Hayek. These information problems permeate virtually all economic processes."

"All during this last 12 years the Federal deficit has roared out of control. Look at this: The big tax cuts for the wealthy, the growth in Government spending, and soaring health care costs all caused the Federal deficit to explode. Our debt is now 4 times as big as it was in 1980. That's right. In the last 12 years we piled up 4 times as much debt as in the previous 200. Now, if all that debt had been invested in strengthening our economy, we'd at least have something to show for our money: more jobs, better educated people, a health care system that works. But as you can see, while the deficit went up, investments in the things that make us stronger and smarter, richer and safer, were neglected: less invested in education, less in our children's future, less in transportation, less in local law enforcement. An awful lot of that money was just wasted. This matters. When you don't invest in jobs and education and economic opportunity, unemployment goes up and our incomes go down. And when the deficit gets bigger and bigger and bigger, the Government takes more of your money just for interest payments. And then it's harder for you to borrow money for your own business or to afford a new home or to send a child to college."

"Knowledge is one of the most scarce of all resources and a pricing system economizes on its use by forcing those with the most knowledge of their own particular situation to make bids for goods and resources based on that knowledge, rather than on their ability to influence other people in planning commissions, legislatures, or royal palaces."

"The 50 worst charities in America devote less than 4 percent of donations raised to direct cash aid. . . . Even as they plead for financial support, operators at many of the 50 worst charities have lied to donors about where their money goes, taken multiple salaries, secretly paid themselves consulting fees or arranged fundraising contracts with friends. . . . Some nonprofits are little more than fronts for fundraising companies . . . . To disguise the meager amount of money that reaches those in need, charities use accounting tricks and inflate the value of donated dollar-store cast-offs . . . ."

"I don't think that corporations are these big bogeymen that a lot of people paint them to be. … A corporation is a group of people, and if you want to come together for profit or nonprofit, that's your business—whatever you want to do."

"After . . . drawing on independent research on donor expectations, . . . assistance from a variety of philanthropic experts, and numerous comments from donors and charities, the BBB Wise Giving Alliance issued the [following] BBB Standards for Charity Accountability. . . . These standards apply to publicly-soliciting organizations that are tax exempt under section 501(c)(3) of the Internal Revenue Code and to other organizations conducting charitable solicitations. . . . The overarching principle of the BBB Standards for Charity Accountability is full disclosure to donors and potential donors at the time of solicitation and thereafter. . . . GOVERNANCE AND OVERSIGHT [Standards 1 - 5] The governing board has the ultimate oversight authority for any charitable organization. This section of the standard seeks to ensure that the volunteer board is active, independent and free of self-dealing. . . . MEASURING EFFECTIVENESS [Standards 6 - 7] The effectiveness of a charity in achieving its mission is of the utmost importance. . . . This is why a section of our standards require that charities set defined, measurable goals and objectives . . . and report on the organization’s progress. . . . FINANCES [Standards 8 - 14] While we believe that a charity’s finances only tell part of the story of how they are performing, they can identify organizations that may be demonstrating poor financial management and/or questionable accounting practices. . . . [T]hese standards . . . seek to ensure that the charity is financially transparent and spends its funds in accordance with its mission and donor expectations. . . . SOLICITATIONS AND INFORMATIONAL MATERIALS [Standards 15 - 20] A fundraising appeal is often the only contact a donor has with a charity and may be the sole impetus for giving. This section of the standards seeks to ensure that a charity’s representations to the public are accurate, complete and respectful."

"In short, the sequence of payments is directly the opposite of what is assumed by those who talk about a “trickle-down” theory. The workers must be paid first and then the profits flow upward later— if at all."

"We're the richest country, but if you're living in a shed When does the economy trickle down Through the corrugated roof above your head?"

"We've looked at your [Trump's] tax proposals. I don't see changes in the corporate tax rates or the kinds of proposals you're referring to that would cause the repatriation, bringing back of money that's stranded overseas. I happen to support that. I happen to support that in a way that will actually work to our benefit. But when I look at what you have proposed, you have what is called now the Trump loophole, because it would so advantage you and the business you do. ... Trumped-up trickle-down. Trickle-down did not work. It got us into the mess we were in, in 2008 and 2009. Slashing taxes on the wealthy hasn't worked. And a lot of really smart, wealthy people know that. And they are saying, hey, we need to do more to make the contributions we should be making to rebuild the middle class. I don't think top-down works in America. I think building the middle class, investing in the middle class, making college debt-free so more young people can get their education, helping people refinance their debt from college at a lower rate. Those are the kinds of things that will really boost the economy. Broad-based, inclusive growth is what we need in America, not more advantages for people at the very top."

"We justify the greater and greater accumulation of capital because we believe that therefrom flows the support of all science, art, learning, and the charities which minister to the humanities of life, all carrying their beneficent effects to the people as a whole."

"Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system."

"The kind of plan that Donald (Trump) has put forth would be trickle-down economics all over again. In fact, it would be the most extreme version, the biggest tax cuts for the top percent of the people in this country than we've ever had. I call it trumped-up trickle-down, because that's exactly what it would be. That is not how we grow the economy."

"Tonight -- tonight, I want to talk about the future of possibilities that we can build together -- a future where the days of trickle-down economics are over and the wealthy and the biggest corporations no longer get the -- all the tax breaks. And, by the way, I understand corporations. I come from a state that has more corporations invested than every one of your states in the state -- the United States combined. And I represented it for 36 years. I'm not anti-corporation. But I grew up in a home where trickle-down economics didn't put much on my dad's kitchen table. That's why I'm determined to turn things around so the middle class does well. When they do well, the poor have a way up and the wealthy still do very well. We all do well. And there's more to do to make sure you're feeling the benefits of all we're doing"

"Now, I don't have all the answers, but I do know the old ways don't work. Trickledown economics has sure failed. And big bureaucracies, both private and public, they've failed too. That's why we need a new approach to government, a government that offers more empowerment and less entitlement. More choices for young people in the schools they attend- in the public schools they attend. And more choices for the elderly and for people with disabilities and the long-term care they receive. A government that is leaner, not meaner; a government that expands opportunity, not bureaucracy; a government that understands that jobs must come from growth in a vibrant and vital system of free enterprise."

"As it turns out, making rich people richer doesn't make the rest of us richer. Nor does it stimulate economic growth, which is the sole justification of . In fact, quite the opposite is true: since the onset of neoliberalism, the rich countries of the have seen growth rates fall from an average of 3.5 per cent during the 1960s and 1970s down to an average of 2 per cent during the 1980s and 1990s As the numbers show, neoliberalism has failed as a tool for - but it has worked brilliantly as a tool for restoring power to the wealthy elite."

"Along came the Republicans, trickle-down economics — one of the worst ideas since snake oil — was put back into place. And we ended up with the great recession. President Obama had to rescue the economy. And I don’t think he gets the credit he deserves for doing that."

"Obama: [M]ost people aren’t spending a lot of time right now worrying about singularity—they are worrying about “Well, is my job going to be replaced by a machine?” I tend to be on the optimistic side—historically we’ve absorbed new technologies, and people find that new jobs are created, they migrate, and our standards of living generally go up. I do think that we may be in a slightly different period now, simply because of the pervasive applicability of AI and other technologies. High-skill folks do very well in these systems. They can leverage their talents, they can interface with machines to extend their reach, their sales, their products and services. Low-wage, low-skill individuals become more and more redundant, and their jobs may not be replaced, but wages are suppressed. And if we are going to successfully manage this transition, we are going to have to have a societal conversation about how we manage this. How are we training and ensuring the economy is inclusive if, in fact, we are producing more than ever, but more and more of it is going to a small group at the top? How do we make sure that folks have a living income? And what does this mean in terms of us supporting things like the arts or culture or making sure our veterans are getting cared for? The social compact has to accommodate these new technologies, and our economic models have to accommodate them."

"Ito: It’s actually nonintuitive which jobs get displaced, because I would bet if you had a computer that understood the medical system, was very good at diagnostics and such, the nurse or the pharmacist is less likely than the doctor to be replaced—they are less expensive. There are actually very high-level jobs, things like lawyers or auditors, that might disappear. Whereas a lot of the service businesses, the arts, and occupations that computers aren’t well suited for won’t be replaced. I don’t know what you think about universal basic income, but as we start to see people getting displaced there’s also this idea that we can look at other models—like academia or the arts, where people have a purpose that isn’t tied directly to money. I think one of the problems is that there’s this general notion of, how can you be smart if you don’t have any money? In academia, I see a lot of smart people without money."

"The spread-the-work schemes, in brief, rest on the same sort of illusion that we have been considering. The people who support such schemes think only of the employment they would provide for particular persons or groups; they do not stop to consider what their whole effect would be on everybody. The spread-the-work schemes rest also, as we began by pointing out, on the false assumption that there is just a fixed amount of work to be done. There could be no greater fallacy. There is no limit to the amount of work to be done as long as any human need or wish that work could fill remains unsatisfied. In a modern exchange economy, the most work will be done when prices, costs, and wages are in the best relations to each other."

"In brief, on net balance, machines, technological improvements, economies and efficiency do not throw men out of work."

"This election was lost four and five and six years ago not this year. They dident start thinking of the old common fellow till just as they started out on the election tour. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickled down. Put it uphill and let it go and it will reach the dryest little spot. But he dident know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night anyhow. But it will at least have passed through the poor fellow’s hands. They saved the big banks but the little ones went up the flue."

"This is not the time for trickle-down solutions. We know that when you lift from the bottom, everybody rises."

"Let us begin with the simplest illustration possible: let us, emulating Bastiat, choose a broken pane of glass. A young hoodlum, say, heaves a brick through the window of a baker’s shop. Th shopkeeper runs out, furious, but the boy is gone. A crowd gathers and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier. As they begihn to think of this, they elaborate upon it. How much does a new plate glass window cost? Fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so on, ad infinitum. The smashed window will go on providing money and employment in an ever widening circle. The theological conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor. Now let us take another look. The crowd is at least right in its first conclusion. This little ct of vandalism will, in the first instance, man more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $50 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer. The glazier’s gain of business, in short, is merely the tailor’s loss of business. No one “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involvd, the tailor. They fogot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye"

"So we have finished with the broken window. An elementary fallacy. Anybody, one would think, would be able to avoid it after a few moments’ thought. Yet the broken-window fallacy, under a hundred disguises, is the most persistent in the history of economics. It is more rampant now than at any time in the past. It is solemnly reaffirmed every day by great captains of industry, by chambers of commerce, by labor union leaders, by editorial writers and newspaper columnists and radio commentators, by learned statisticians using the most refined techniques, by professors of economics in our best universities. In their various ways they all dilate upon the advantages of destruction."

"Though some of them would disdain to say that there are net benefits in small acts of destruction, they see almost endless benefits in enormous acts of destruction. They tell us how much better off economically we all are in war than in peace. They see “miracles of production” which it requires a war to achieve. And they see a postwar world made certainly prosperous by an enormous “accumulated” or “backed up” demand. In Europe they joyously count the houses, the whole cities that have been leveled to the ground and that “will have to be replaced.” In America they count the houses that could not be built during the war, the nylon stockings that could not be supplied, the worn-out automobiles and tires, the obsolescent radios and refrigerators. They bring together formidable totals. It is merely our old friend, the broken-window fallacy, in new clothing, and grown fat beyond recognition. This time it is supported by a whole bundle of related fallacies. It confuses need with demand."

"We refer to the question: What sort of creature man’s next successor in the supremacy of the earth is likely to be. We have often heard this debated; but it appears to us that we are ourselves creating our own successors; we are daily adding to the beauty and delicacy of their physical organisation; we are daily giving them greater power and supplying by all sorts of ingenious contrivances that self-regulating, self-acting power which will be to them what intellect has been to the human race. In the course of ages we shall find ourselves the inferior race."

"But you have one thing that may save you, and that is your youth. This is your great strength. It is also why I hate and fear you. Hear me out. It has been said that children are our future. But does that not also mean that we are their past? You are here to replace us. I don't understand why we're here helping and honoring them. You do not see union workers holding benefits for robots."

"Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is long-continued mass unemployment, machines get the blame anew. This fallacy is still the basis of many labor union practices. The public tolerates these practices because it either believes at bottom that the unions are right, or is too confused to see just why they are wrong. The belief that machines cause unemployment, when held with any logical consistency, leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat."

"Suppose a clothing manufacturer learns of a machine that will make men’s and women’s overcoats for half as much labor as previously. He installs the machines and drops half his labor force. This looks at first glance like a clear loss of employment. But the machine itself required labor to make it; so here, as one offset, are jobs that would not otherwise have existed. The manufacturer, how ever, would have adopted the machine only if it had either made better suits for half as much labor, or had made the same kind of suits at a smaller cost. If we assume the latter, we cannot assume that the amount of labor to make the machines was as great in terms of pay rolls as the amount of labor that the clothing manufacturer hopes to save in the long run by adopting the machine; otherwise there would have been no economy, and he would not have adopted it. So there is still a net loss of employment to be accounted for. But we should at least keep in mind the real possibility that even the first effect of the introduction of labor-saving machinery may be to increase employment on net balance; because it is usually only in the long run that the clothing manufacturer expects to save money by adopting the machine: it may take several years for the machine to “pay for itself.” After the machine has produced economies sufficient to offset its cost, the clothing manufacturer has more profits than before. (We shall assume that he merely sells his coats for the same price as his competitors, and makes no effort to undersell them.) At this point, it may seem, labor has suffered a net loss of employment, while it is only the manufacturer, the capitalist, who has gained. But it is precisely out of these extra profits that the subsequent social gains must come. The manufacturer must use these extra profits in at least one of three ways, and possibly he will use part of them in all three: (1) he will use the extra profits to expand his operations by buying more machines to make more coats; or (2) he will invest the extra profits in some other industry; or (3) he will spend the extra profits on increasing his own consumption. Whichever of these three courses he takes, he will increase employment."

"Iowa had a Depression too but I don't know if the money supply in Iowa fell during that period. But I guess I'd have to have better reasons man that for giving up on the monetary explanation. The timing and the magnitudes are just right, totally convincing, if you go back and read the Friedman and Schwartz chapter on the Great Depression. But how did it work? We should be able to write down an economic model that kind of explains the workings. How did it happen that bank failures and monetary declines translated into huge movements in employment and production? We just don't have a decent theoretical model. Maybe Rapping and I thought we had, but I don't think we did and I don't think anyone else does now either. I think that has been the problem right along. Is there some other explanation for the 1930s? I don't know. I told Prescott I’d hate to have to rewrite the Friedman and Schwartz book where the role Friedman and Schwartz assigned to monetary collapses is assigned instead to productivity shocks. Where is the productivity shock that cuts output in half in that period? Is it a flood or a hurricane? If it really happened, shouldn’t we be able to see it in the data?"

"Colander: What’s your view of the New Keynesian approach? Tobin: I’m not sure what that means. If it means people like Greg Mankiw, I don’t regard them as Keynesians. I don’t think they have involuntary unemployment or absence of market clearing. It is a misnomer to call Mankiw any form of Keynesian. Colander: How about real-business-cycle theorists? Tobin: Well, that’s just the enemy."

"Real business cycle theory never got close to the world of policy—not even the most extreme conservative politicians were prepared to tell the American people to welcome recessions as part of the natural and optimal course of events. And instead of spreading its intellectual range, the movement became increasingly ingrown over time. Indeed, one observer described it as becoming like a fringe political movement that successively purges itself of the ideologically impure until only a handful of members are left."

"The other response [to the failure of the Lucas project], by those who had already invested vast effort and their careers in the Lucas project, was to drop the whole original purpose of the project, which was to explain why demand shocks matter. They turned instead to real business cycle models, which asserted that the ups and downs of the economy are caused by technological shocks magnified by rational labor supply responses. Full disclosure: this has always seemed absurd to me; as many have pointed out, the idea that the unemployed during a recession are voluntarily choosing to take time off is something only a professor could believe. But the math was impressive, and RBC became a self-contained, self-replicating intellectual world. [...] The Lesser Depression arrives. It’s clearly not a technological shock; clearly, also, nobody is confused about whether we’re in a slump, as the old Lucas model required."

"The New Classicists are my particular bugabear. They are always telling us that we must suppose that markets are always clearing, that we've got to interpret the business cycle as if markets are always clearing, that we've got to see unemployment as voluntary withholding of labor from the market. But this notion that all markets are clearing, or are close enough to clearing so that we are required to do our reasoning as if they were clearing, has no more merit than a methodology which hardly gets explicitly discussed. … [I]f we are doing macroeconomics—which is concerned with lapses from full coordination, and what accounts for the greater or lesser degree of full coordination in the economy—then these transitional obstacles are the center of the topic. What might be merely a fringe complication set aside in a micro analysis are moved to the very center when we are doing macroeconomics. Yet New Classical economists dismisses all concerns with lapses of coordination and the failure of market so clear completely. It simply wipes away the problem."

"[New classical economics] was the starting point for a rightward shift in economics that went against the idea that monetary policy can improve macroeconomic outcomes."

"There was, however, another approach to justice that also emerged at about the same time in the works of other Enlightenment thinkers – other than the social contract theorists of that period. These theorists did not erect a fully developed structure of a theory of justice, but the ingredients of a different approach – different from the social contract theory – which they helped to identify, can be developed from their alternative understanding of the demands of justice. These theorists (including Adam Smith, the Marquis de Condorcet and Mary Wollstonecraft in the eighteenth century, and extended later to John Stuart Mill and Karl Marx, among others) took a variety of approaches that differed in many ways from each other, but shared a common interest in making comparisons between different ways in which people’s lives may go, jointly influenced by the working of institutions, people’s actual behaviour, their social interactions and other factors that significantly impact on what actually happens. My attempt at advancing a theory of justice closely relates to this alternative foundation. The analytical – and rather mathematical – discipline of ‘social choice theory’, which had its origin in the works of French mathematicians in the eighteenth century, in particular the Marquis de Condorcet, but also others like Borda, and which has been revived and reformulated in our times by Kenneth Arrow, also belongs to this second line of investigation."

"Rational expectations by itself seems to me separable from the assumption of price-cleared markets. It could be used in a model in which quantity adjustments were helping to equate supply and demand. Lucas himself says that he adopts the market clearing assumption because it is convenient, not because it is realistic. [...] The new classicals will also say that if you observe long-term contracts, which on the surface seem to depart from market clearing prices, you can simply reinterpret what market clearing prices are. You reinterpret the demand and supply functions under the constraint of the contracts. But then, they are not able to maintain the strong propositions that they were able to derive from their other models, notably about policy-ineffectiveness."

"An offshoot of the Chicago school is the New Classical school, which uses the concept of "rational expectations" to argue that government policies are ineffective at best and counterproductive at worst. Leaders of the New Classical macroeconomics include Robert E. Lucas at the University of Chicago and Thomas J. Sargent at the University of Minnesota. They contend that Keynesians and other proponents of interventionism fail to take into account the reaction of businesses and individuals to their policies. When the expectations of these market participants are taken into account, the impact of systematic government policies is less likely to be felt, while unsystematic government behavior is likely to be deleterious (Lucas and Sargent 1978: 69-70)."

"You could say that [new classical revolution] is as much a revolution against old monetarism as it is against Keynesianism. The disagreement between monetarists and Keynesians was about the value of some parameters. It is not as fundamental a split as we experience now."

"In contrast with the ‘social contract’ tradition, a ‘social choice’ approach is concerned with public reasoning – and that can go well beyond national boundaries. There is a strong case for an inclusive effort to bring in the perspectives and values of other people, even when they live far away. Indeed, the inputs into the exercise of invoking of the ‘impartial spectator’ can come from far as well as near, as Smith explained."

"The recent flourishing of New Classical economics, and especially its Equilibrium Business Cycle Theory (EBCT), has given a fresh hearing to the Old—but still developing—Austrian Business Cycle Theory (ABCT). While the New and the Old differ radically in both substance and methods, they exhibit a certain formal congruency that has captured the attention of both schools. The formal similarities between EBCT and ABCT invites a point-by-point comparison, but the comparison itself dramatizes differences between the two views in a way that adds to the integrity and plausibility of the Austrian theory."

"Since the late 1960s macroeconomic debates in the United States have centered on the competing interpretations of the new classical and new Keynesian macroeconomics. The initial new classical model developed in the early 1970s by Robert E. Lucas, Jr., combined market-clearing, imperfect information, and rational expectations. After much testing, it was eventually rejected in the late 1970s for failing to explain why business cycles lasted on average four years while information delays lasted only a few weeks. It was soon replaced by a second new classical approach, the Real Business Cycle (RBC) model, which was also based on continuous market clearing and competitive equilibrium, but now generated the business cycle through serially correlated procyclical technology shocks."

"Of course the Keynesians did not sit still for these developments. They recognized and accepted many of the counterarguments made by Friedman and the New Classicals. However, the general strategy of the socalled New Keynesians was to point out that various informational limitations and rigidities inherent in real-world markets prevent markets from achieving the equilibria that the New Classical models were built upon. As a result, argued the New Keynesians, government intervention might improve upon the free market by virtue of government's supposedly superior information and ability to take advantage of those rigidities and push the economy closer to that equilibrium. So New Keynesians share many of the same underlying assumptions as the New Classicals, they simply believe that in some (if not many) cases markets alone are unable to reach the equilibrium that the New Classicals believe they can."

"For a period of roughly 35 years, Keynesian theory provided a central paradigm for macroeconomists, and considerable progress was made on several empirical fronts. It was widely recognized that some of the ingredients of Keynesian economics (e.g. money illusion and/or nominal wage rigidity) rested on slender to non-existent microtheoretic foundations; and there were always dissenters. But, thought of as a collection of empirical regularities that fit together into a coherent whole, the theory worked tolerably well. In the 1970s, however, the Keynesian paradigm was rejected by a great many academic economists, especially in the United States, in favour of what we now call new classical economics. By about 1980, it was hard to find an American academic macroeconomist under the age of 40 who professed to be a Keynesian. That was an astonishing intellectual turnabout in less than a decade, an intellectual revolution for sure."