Intellectual Support

Intellectual Support How economists came to be so passionately hated one would think they are powerful

Rule of the Strong in 1944 • Hitler still ruled in Germany • Stalin still ruled in the USSR • Tojo still ruled in Japan • Chiang (or Japan) ruled in China • Churchill ruled in the United Kingdom • Roosevelt ruled in the United States • Germany still dominated Europe • Elsewhere, most still were colonies

Also in 1944 • Keynes still ruled economics • Free market economists were still considered right-wing cranks • Mainline economists were busy fine-tuning their theories of fine-tuning the economy

In the Following Decade • Central planning was de rigueur • Decolonization enabled the emergence of new leaders • Mixed systems eclipsed market capitalism

Economic Policy • Emphasis on fiscal policy: governments decide how much to spend and where to spend it • Multipliers would do the rest • Monetary policy was to be accommodating

Economic Policy • Tax cuts, under Kennedy, Reagan, and now Bush, provide a more liberal version: spending decisions are made by the public • They also provide a libertarian angle: tax cuts have supply-side implications

Economic Policy • Monetary policy: its effect is based entirely on decisions of the general public • Monetarist economists did their homework and showed how powerful monetary policy could be • They were not taken seriously until all else had failed

Important Contributors • Many important books and articles by economists like Milton Friedman and Friederich von Hayek were ignored or ridiculed • The last laugh goes to those who win a Nobel Prize

Stagflation • Too little demand => stagnation • Too much demand => inflation • But in the 70s we had both • Another Nobel laureate, Robert Mundell, developed policy combinations that would simultaneously attack the two hitherto incompatible problems • We will discuss this matter later

Intellectual Input • Hayek lived long enough to see most of his ideas bear fruit, but not long enough to see himself become an icon, along with fellow Viennese economist Joseph Schumpeter, to the new information economy buffs. • I have used Hayek’s ideas about information to analyze why traffic circles in Hanoi and HCMC work so well

Intellectual Input • Friedman is as alive as ever in his 90s and continues working. Sadly, he died at 94. • Mundell lives in an Italian villa with his young wife and children • He was also the “father” or chair of my dissertation committee

Intellectual Support