***Originally posted in our forums in 2006***
i was just watching this documentary made in 1992 about the british economy (since the 60s and upto the late 80s)
it charts the well told story of the switch from keynesianism to moneterism (and the apparent failure of both to predict inflation and general trends etc)
The League of Gentleman (adam curtis bbc 1992)
Forty years ago, a group of economists managed to convince British politicians that they had foolproof technical means to make Britain great again. This film tells the saga of how their experiments led the country deeper into economic decline.
What are the current trends in monetary policy and state economic management? (is it a mix of keynesian ideas and moneterism?)
Would it be fair to say that in todays economic world there is little belief in grand narratives like those put forward by keynes and the moneterists?, if so what replaces them?
sorry to put forward such a basic question, hopefully it will be correspondingly straightforward to answer.
I do’nt know if it’s really a big VERSUS. YOu’d think the government (I’m going to use my own Canadian context) would learn some thing from the 30’s depression, they did, but then major recession in the 80s and even bigger problems in the West during that time. So what did the Central Bank learn? Tighten money supply, regulate it at least, don’t let the stupid inflation thing so high… etc.
Well the whole discussion is surrounding how money supply is used/determined. Monetarism, money supple you use, predict, dictate; Keynesian, money supply you can really predict, still use though……
Tightening of inflation in canada since the 80s means the central bank uses money supply, yet still bobbles around. With globalization countries need to be ever more vigilent about their own economic situation/health.
I believe on one hand you have a more lessaiz faire attitude (you can see this at the provincial level here) that permits the economy to dictate itself, but at the same time the Central Bank can intervene and dictate who holds money and how much through various instruments like interest rates and exchange rate. SO to answer your questions, a combination.
I think it would be interesting to bring this discussion more up to date and gauge what the general economic thinking is at the moment. Given the recession I was under the impression that pretty much the whole of the western world had followed a keynesian expansionist response to falling aggregate demand.
However I am not familiar with the current economic thinking and how the central banks will be enacting monetary policy after the recession.
The provision of cheap money has failed to maintain growth in the economy over the long term (was this the new consensus advice?). Currently I hear the Austrian school has been discussed a lot.
Would anybody be able to provide a brief outline of the macroeconomic thinking from the recession onwards?
Current economic thinking hasn’t made a huge shift away from Keynesian economics. If anything, some are looking at more government intervention to prevent the run ups, but in reality it’s business as usual. I’m not too clear about new regulations in place. The changes in economic theory will start to unroll in the coming years, but the 08 crash has no immediately changed the fundamental outlook on economic systems.