- 24 Settembre 2018
- by Blogger
There have been many negative developments in the ten years following the Lehman crisis. Logically, you would expect the authorities would have been rethinking monetary and fiscal policies to ensure that the errors that led up to the Lehman crisis are not repeated. You would be wrong, both for the current credit cycle and for the next. The problem is one of not knowing who is responsible. And this is an economic theory matter.
Modern economists insist that the state should have primacy over free markets. They argue that free markets have shown a track record of periodic booms and slumps, which can only be alleviated by the state. This belief has evolved from the Keynesians’ original proposition that the state should run a balanced budget over the business cycle, instead of all the time. The original idea was to increase spending by running budget deficits to create money during the slump in the hope of recouping government finances later when the recovery generates surplus tax revenues. The classic economic theory was replaced by a state theory of economic planning.