The Economy: Old Myths and New Realities

The Economy: Old Myths and New Realities

The Economy: Old Myths and New Realities

The Economy: Old Myths and New Realities

Excerpt

This book focuses on the economic problems of the mid- 1970's, a period when economists, the economy, and economic policy have been under siege. In economic affairs, the unprecedented has become commonplace, to wit:

• a menacing double-digit inflation curbed but not cured either by our first "peacetime" price-wage controls or by the highest unemployment rates in 35 years;

• the longest and deepest recession since the Great Depression of the 1930's;

• an energy crisis that caught us unawares and hence unprepared and remains unresolved;

• startling jumps in the relative prices of farm prices and energy, the end of an era of cheap food and oil;

• the highest interest rates and the biggest budget deficits in U. S. history;

• the near bankruptcy of one of the world's great cities;

• in the international economy the acceptance of the unacceptable, namely, dollar devaluation, the dethroning of gold, and floating (though managed) exchange rates.

In short, what couldn't happen here, did. And the resulting changes in the character and intensity of the problems facing the economic policy maker and the economics profession were profound. Ironically, they forced a conservative Republican administration, against its will and intent, into the most active role in peacetime economic management (the critics would say mismanagement) that the country had yet seen. The grist for the mills of economic controversy and disagreement proved to be endless.

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