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Principles of Macroeconomic Policy in a Stagflationary World (1981)

In: The Reform of Macroeconomic Policy

Author

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  • J. O. N. Perkins

    (University of Melbourne)

Abstract

The basic approach to the discussion of macroeconomic policy that continues to be generally applied is that which was useful in the conditions that prevailed in the thirty years or so from the late 1930s to the late 1960s. During those years the principal macroeconomic problem at any given time was either the removal of excess demand or the reduction of unemployment. For the past decade or so, however, the problem of the world economy has generally been to reduce both inflation and unemployment. Yet we continue to try to apply models that are inherently unable to deal with that combination of problems, as they essentially lack one of the dimensions of the dual problem that we are facing. Consequently, policy makers relying on these models often become preoccupied with stopping inflation, which leads them to concentrate their measures disproportionately upon that objective, so that they thereby make unemployment worse. Alternatively, they aim their policy measures solely or primarily at reducing unemployment, and so are likely to make inflation worse.

Suggested Citation

  • J. O. N. Perkins, 2000. "Principles of Macroeconomic Policy in a Stagflationary World (1981)," Palgrave Macmillan Books, in: The Reform of Macroeconomic Policy, chapter 2, pages 4-27, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-28873-7_2
    DOI: 10.1057/9780230288737_2
    as

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