Does Macroeconomic Theory Influence Macroeconomic Policy?

30 June 2009 at 3:53 pm 2 comments

| Peter Klein |

Not really, according to John Wood’s History of Macroeconomic Policy in the United States (Routledge, 2008). As David Wheelock notes in his EH.Net review:

Wood argues that U.S. fiscal and monetary policy have been remarkably consistent over the decades and largely uninfluenced by macroeconomic theory. Economists have rationalized more than influenced policy, Wood contends, and the direction of influence between economic theory and practice is primarily from the latter to the former.

This is of course the classic explanation for the spread of Keynesianism after 1936: rather than proposing a new approach to macroeconomic policy, the General Theory simply rationalized the massive deficit-spending and easy-money policies already in place (and long desired by disreputable economists such as Foster and Catchings).

Entry filed under: - Klein -, Methods/Methodology/Theory of Science, Myths and Realities.

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2 Comments Add your own

  • 1. Greg Ransom  |  30 June 2009 at 11:45 pm

    The influence of Foster and Catchings on Hoover was direct — he wrote the approving introduction to one of their books.

    F & C also influenced Sen. Wagner & FDR — as well as most economists in America.

    It can even be argued that Keynes is simply a British/Marshall interpretation of F & C.

  • 2. James A. Donald  |  19 August 2009 at 3:36 pm

    Greg Ransom tells us that macroeconomists must have influenced their masters because their masters commended them.

    That the powerful commend their courtiers is not evidence that the courtiers are influencing the ideas of their masters, rather it is evidence that the courtiers are successful in flattering their masters that the programs of their masters, chosen for wholly political reasons, are wise and good.

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