The Reckoning: A Decade of
The purpose of all three major experiments being conducted during the 1980s was to improve the economic performance of the U.S. economy. Certain policy levers were pulled and certain consequences were predicted. Continuing to apply the scientific method to these historic experiments, the next step is to determine whether the predicted results actually occurred. There is probably little doubt by now that the experimenters' hypotheses were consistently wide of the mark. How far off, though, is the focus of the first part of this chapter.
It is true in science as well as economics that the more interesting aspects of experiments are often the unintentional side effects. It is the unusual or unexpected outcomes of an experiment that pique the imagination in search of better theories. During the economic experiments of the 1980s there was no shortage of side effects. In fact it is probably safe to say that the United States experienced more unusual economic events during this decade than at any other time except for the world wars and the Depression. In the 1980s interest rates, unemployment, the savings rate, government deficits, the value of the dollar, trade balances, foreign debt, mergers and acquisitions, the stock market and income distribution all careened wildly off course. To the average observer watching the