But the present government with its commitment to cutting the budget deficit and public debt are in any case pursuing the opposite of a Keynesian policy.
As a practical prescription for improving the economy, the empirical evidence is clear in my view that discretionary Keynesian policy does not work and the experience of the past three years confirms this view.
Since the present credit crunch will bring longer under-demand than did the Wall Street crash in 1929, Britain's wisest and most Keynesian policy would be an income-tax holiday for at least the poorer half of its too many income-taxpayers.
If they had been doing what good Keynesian policy demanded of them then, paying down the debt, running a budget surplus instead of the 3-4% deficit they were running, then we could be good Keynesians now and could borrow our way out of the current slump and do some fiscal stimulus.
We are now in year five of what has been one of the great experiments in Keynesian economic policy.
The Lucas-Sargent critique calls into serious question Keynesian discretionary policy.
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First, Germany provides a natural experiment of Keynesian versus Non-Keynesian labor market policy.
Ronald Reagan explicitly scraped Keynesian discretionary monetary policy in favor of the Fed focusing on a stable dollar without inflation as its mission.
During the next decade, the Fed returned to Keynesian discretionary monetary policy, trying to steer the real economy to long term growth by manipulating interest rates, loosening when the economy seemed to turn down, tightening when this seemed to go too far and inflation started to rise.
The Japanese political class has averted a full-fledged deflationary cleansing of their economy by engaging in endless rounds of Keynesian fiscal stimulus and loose monetary policy.
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Keynesian economists argue that the correct policy response is to boost government spending (G) through fiscal stimulus, allowing consumers and businesses time to adjust and recover, and to gradually remove that stimulus as the economy returns to its normal growth trajectory.
Also, its Keynesian-style demand stimulus and attempts at industrial policy have failed.
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But the country was running a budget surplus before that, and a continuing tight fiscal policy has not only not caused a Keynesian disaster, but has accompanied a strong rebound.
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President Bush exacerbated the problem, further pumping up the housing bubble with his cheap dollar monetary policy, under the illogical, outdated, Keynesian thinking that a cheap dollar expands the economy by promoting exports.
Indeed, the models that I have built support the use of policy rules, such as the Taylor rule for monetary policy or the automatic stabilizers for fiscal policy, which are the polar opposite of Keynesian discretion.
While a Keynesian focus only on interest rates caused most observers to think of monetary policy as very easy, a Milton Friedman type monetarist might have argued that monetary policy was too tight for the circumstances.
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Now we see President Barack Obama engaged in this same game regarding federal tax policy and financing for a so-called jobs plan based on the same Keynesian theory that he just proved fallacious yet again, as has been proved over and over since the 1930s.
Because the heart of the "Keynesian" critique of Mr Osborne's approach has always been that there were rare times when monetary policy did not work very well, and that now, just after a major financial crisis, was one of those times.
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