The Making of Economic Policy: History, Theory, Politics (Macroeconomics & Finance)

As late as the mid-1970s there was a "tacit consensus" in macroeconomics. In spite of the controversies that always raged, the participants shared some basic underlying premises. Business cycles were socially undesirable and needed to be tamed; the postwar business cycle was substantially less severe than in prior times; wage and price inflexibility was a source of instability; money and the financial systems mattered; and normative policy analysis was the proper way to evaluate alternative prescriptions. "The Making of Economic Policy" explores the challenges to the tacit consensus in areas ranging from economic history, dynamic theory, time-series econometrics, game theoretic analyses of policy, and congressional politics. In each of these areas, it first reviews the current debate and then provides new analysis and new perspectives on the controversies. The book takes a critical look at recent views and marshalls appropriate empirical evidence to address competing claims. It demonstrates that the tacit consensus can survive the challenges.