The Goals of Macroeconomic Policy

Politicians win elections by promising Jobs Jobs Jobs but in practicethese promises quickly fall by the wayside. <strong>The Goals of Macroeconomic Policy</stro... » 

Politicians win elections by promising Jobs Jobs Jobs but in practicethese promises quickly fall by the wayside. The Goals of Macroeconomic Policyanalyzes why governments so rarely achieve their economic goals. Martin F. J.Prachowny argues that full employment should not be the primary objective ofeconomic policy. He shows that Pareto optimalitythe guiding principle ofpolicy evaluationdoes not apply to macroeconomic policies and that fullemployment is essentially a political aim.The book is divided into three sections. The first is historical it examinesthe limited literature on the optimality of macroeconomic goals and the recordof successive governments in achieving the goals they have set. The second partpresents a theory of the labor market and an evaluation of welfare changesfrom rising or falling real wages.The concluding part looks at public choice decisions especially those relatedto spending and taxation from an individualistic perspective. Althoughoriginally intended to show what sacrifices are necessary in collectivedecisions the aim is now to maximize your own benefit from government spendingand to avoid as much of the burden of taxation as possible. The resultingfreerider problem creates budget deficits which are no longercountercyclical but are tolerated because they have no adverse welfareconsequences for the current population instead they leave future generationssaddled with extra interest payments on the accumulated debt. A number ofpossible ways of avoiding unnecessary budget deficits are explored without muchhope for success. «