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

17 Pages Posted: 30 Apr 2012

See all articles by John Nevile

John Nevile

UNSW Australia Business School, School of Economics

Peter Kriesler

UNSW Australia Business School, School of Economics

Date Written: April 23, 2012

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

JEL Classification: E00, E52, E62

Suggested Citation

Nevile, John and Kriesler, Peter, A Bright Future Can Be Ours!: Macroeconomic Policy for Non-Euro-Zone Western Countries (April 23, 2012). UNSW Australian School of Business Research Paper No. 2012-28, Available at SSRN: https://ssrn.com/abstract=2045239 or http://dx.doi.org/10.2139/ssrn.2045239

John Nevile

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Peter Kriesler (Contact Author)

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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