Fiscal Policy: Why Aggregate Demand Management Fails and What to do About it
Pavlina R. Tcherneva
Bard College - The Levy Economics Institute; Franklin and Marshall College
February 11, 2011
Levy Economics Institute Working Paper No. 650
This paper argues for a fundamental reorientation of fiscal policy, from the current aggregate demand management model to a model that explicitly and directly targets the unemployed. Even though aggregate demand management has several important benefits in stabilizing an unstable economy, it also has a number of serious drawbacks that merit its reconsideration. The paper identifies the shortcomings that can be observed during both recessions and economic recoveries, and builds the case for a targeted demand-management approach that can deliver economic stabilization through full employment and better income distribution. This approach is consistent with Keynes’s original policy recommendations, largely neglected or forgotten by economists across the theoretical spectrum, and offers a reinterpretation of his proposal for the modern context that draws on the work of Hyman Minsky.
Number of Pages in PDF File: 14
Keywords: Labor Demand Targeting, Aggregate Demand Management, Full Employment, Income Inequality, Poverty
JEL Classification: E25, J2, J45, I38working papers series
Date posted: February 12, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.750 seconds