https://citizendium.org/wiki/index.php?title=Macroeconomics&feed=atom&action=historyMacroeconomics - Revision history2024-03-29T00:21:54ZRevision history for this page on the wikiMediaWiki 1.39.5https://citizendium.org/wiki/index.php?title=Macroeconomics&diff=928275&oldid=prevJohn Leach: Text replacement - "market" to "market (economics)|"2024-03-08T00:47:38Z<p>Text replacement - "<a href="/wiki/index.php?title=Market&action=edit&redlink=1" class="new" title="Market (page does not exist)">market</a>" to "<a href="/wiki/Market_(economics)" title="Market (economics)">market (economics)</a>"</p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The classical model===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The classical model===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>Classical theory applies the [[market]] mechanism (which is described in the article on [[microeconomics]]) both to the problem of reconciling savings and investment plans, and to the operation of the labour market. It envisages the economy as a set of inter-linked markets with supply in one market determining demand in others in a manner which could be represented as a vast set of simultaneous equations. It embodies the concept of "general equilibrium" in which an imaginary auctioneer organises trading at prices which reconcile [[supply and demand]] in all markets. It assumes in particular that in the market for savings, an excess of planned saving over planned investment would result in a reduction in the interest rate sufficient to bring the plans into line – and vice versa. In the market for labour, it assumes that if the planned demand for labour fell below the level required for full employment, wages would fall to a level at which full [[employment]] would be restored. The economy is thus taken to have a self-righting capacity as regards both output and employment.</div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>Classical theory applies the [[<ins style="font-weight: bold; text-decoration: none;">market (economics)|</ins>market]] mechanism (which is described in the article on [[microeconomics]]) both to the problem of reconciling savings and investment plans, and to the operation of the labour market. It envisages the economy as a set of inter-linked markets with supply in one market determining demand in others in a manner which could be represented as a vast set of simultaneous equations. It embodies the concept of "general equilibrium" in which an imaginary auctioneer organises trading at prices which reconcile [[supply and demand]] in all markets. It assumes in particular that in the market for savings, an excess of planned saving over planned investment would result in a reduction in the interest rate sufficient to bring the plans into line – and vice versa. In the market for labour, it assumes that if the planned demand for labour fell below the level required for full employment, wages would fall to a level at which full [[employment]] would be restored. The economy is thus taken to have a self-righting capacity as regards both output and employment.</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===[[Keynesian theory]]===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===[[Keynesian theory]]===</div></td></tr>
</table>John Leachhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=34238&oldid=previmported>Meg Taylor at 23:34, 2 October 20132013-10-02T23:34:13Z<p></p>
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<td colspan="2" style="background-color: #fff; color: #202122; text-align: center;">Revision as of 18:34, 2 October 2013</td>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''The Main Macroeconomic Theories'''==</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''The Main Macroeconomic Theories'''==</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;"></del></div></td><td colspan="2" class="diff-side-added"></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The circular flow of income===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The circular flow of income===</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The simplest theoretical model of a national economy is a system consisting of all of the country’s firms on the one hand, and all of its households on the other <ref> For a diagrammatic representation of the model, see the tutorials subpage</ref>. National income <ref> For a definition of National income, see the article on [[Gross Domestic Product]]</ref> in such a system is the total value of the firms’ output, which must be the same as the amount of money reaching the households in the form of wages interest and dividends (it has nowhere else to go). That money is then either saved, or spent on the firms’ products. The money reaching the firms consists of that spent by consumers and that invested (ie spent on the purchase of capital equipment by some of the firms). National income is thus both household spending plus savings and household spending plus investment. It follows, as a matter of arithmetic, that in such a system, savings must match investment. But in the economy as we know it, savings plans and investment plans are mostly made independently by different people. If the model is to represent what happens in such an economy, it must contain a mechanism by which planned investment is brought into line with planned savings.</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The simplest theoretical model of a national economy is a system consisting of all of the country’s firms on the one hand, and all of its households on the other <ref> For a diagrammatic representation of the model, see the tutorials subpage</ref>. National income <ref> For a definition of National income, see the article on [[Gross Domestic Product]]</ref> in such a system is the total value of the firms’ output, which must be the same as the amount of money reaching the households in the form of wages interest and dividends (it has nowhere else to go). That money is then either saved, or spent on the firms’ products. The money reaching the firms consists of that spent by consumers and that invested (ie spent on the purchase of capital equipment by some of the firms). National income is thus both household spending plus savings and household spending plus investment. It follows, as a matter of arithmetic, that in such a system, savings must match investment. But in the economy as we know it, savings plans and investment plans are mostly made independently by different people. If the model is to represent what happens in such an economy, it must contain a mechanism by which planned investment is brought into line with planned savings.</div></td></tr>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''Qualifications and Extensions'''==</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''Qualifications and Extensions'''==</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;"></del></div></td><td colspan="2" class="diff-side-added"></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;"></del></div></td><td colspan="2" class="diff-side-added"></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Expectations===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Expectations===</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>None of the above theories makes allowance for the fact that people learn from experience. The fact that they do has a bearing upon economic activity, however. The price that an investor pays for a security is determined by expectations of future returns, based upon the experience of past performance. But it is hard to say how widely such behaviour applies. The assumption that people generally fail to learn from experience and make persistent forecasting errors is clearly unsatisfactory, but the opposite assumption is also difficult to believe. The ''[[Rational Expectations Hypothesis]]'' <ref> GK Shaw ''Rational Expectations'', Wheatsheaf Books, Harvester Press 1984 </ref> postulates that, in forming their expectations, people make use of all of the relevant information; and that, although they may make random errors, their forecasts are not systematically biased. While not claiming it to be literally true, economists of the ''New Classical school'' claim that it offers a better hypothesis concerning the working of the economy than the available alternatives. Experience has shown that expectations do in fact have a significant influence upon some aspects of economic behaviour. In particular, it has been found that the inflation rate at any given time is influenced by expectations of future inflation - a fact that has implications for the conduct of [[monetary policy]].</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>None of the above theories makes allowance for the fact that people learn from experience. The fact that they do has a bearing upon economic activity, however. The price that an investor pays for a security is determined by expectations of future returns, based upon the experience of past performance. But it is hard to say how widely such behaviour applies. The assumption that people generally fail to learn from experience and make persistent forecasting errors is clearly unsatisfactory, but the opposite assumption is also difficult to believe. The ''[[Rational Expectations Hypothesis]]'' <ref> GK Shaw ''Rational Expectations'', Wheatsheaf Books, Harvester Press 1984 </ref> postulates that, in forming their expectations, people make use of all of the relevant information; and that, although they may make random errors, their forecasts are not systematically biased. While not claiming it to be literally true, economists of the ''New Classical school'' claim that it offers a better hypothesis concerning the working of the economy than the available alternatives. Experience has shown that expectations do in fact have a significant influence upon some aspects of economic behaviour. In particular, it has been found that the inflation rate at any given time is influenced by expectations of future inflation - a fact that has implications for the conduct of [[monetary policy]].</div></td></tr>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''Management of the Economy'''==</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''Management of the Economy'''==</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;"></del></div></td><td colspan="2" class="diff-side-added"></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;"></del></div></td><td colspan="2" class="diff-side-added"></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Tackling unemployment===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Tackling unemployment===</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The classical economists believed that nothing could be done to reduce unemployment except by reducing market rigidities. [[Keynesians]] believe that any tendency for demand to fall below the level necessary for full employment can be corrected by increased [[public expenditure]] or reduced [[taxation]]. That would be partly effected without specific government action by the operation of the economy’s [[automatic stabilisers]]. [[monetarism|Monetarists]] recommend using a combination of automatic stabilisers and [[supply-side measures]]. <ref> Milton Friedman "A Monetary and Fiscal Framework for Economic Stability" in ''Essays in Positive Economics'' Phoenix Books 1966 </ref>. However, a [[fiscal stimulus]] can quickly boost spending power, whereas [[monetary policy]] acts with long and uncertain lags. Discretionary fiscal policy has often been used to regulate developed economies but, because of legislative delays it has sometimes had a destabilising effect because the stimulus arrived when activity was recovering. A study by economists at the [[International Monetary Fund]] has shown that a fiscal stimulus package equivalent to 1 percent of country's [[Gross Domestic Product|GDP]] is associated on average with GDP increases of about 0.1 to 0.2 percent. In advanced economies, the longer-term effects are also positive and even possibly higher. But the longer-term effects are typically negative in emerging economies. </div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>The classical economists believed that nothing could be done to reduce unemployment except by reducing market rigidities. [[Keynesians]] believe that any tendency for demand to fall below the level necessary for full employment can be corrected by increased [[public expenditure]] or reduced [[taxation]]. That would be partly effected without specific government action by the operation of the economy’s [[automatic stabilisers]]. [[monetarism|Monetarists]] recommend using a combination of automatic stabilisers and [[supply-side measures]]. <ref> Milton Friedman "A Monetary and Fiscal Framework for Economic Stability" in ''Essays in Positive Economics'' Phoenix Books 1966 </ref>. However, a [[fiscal stimulus]] can quickly boost spending power, whereas [[monetary policy]] acts with long and uncertain lags. Discretionary fiscal policy has often been used to regulate developed economies but, because of legislative delays it has sometimes had a destabilising effect because the stimulus arrived when activity was recovering. A study by economists at the [[International Monetary Fund]] has shown that a fiscal stimulus package equivalent to 1 percent of country's [[Gross Domestic Product|GDP]] is associated on average with GDP increases of about 0.1 to 0.2 percent. In advanced economies, the longer-term effects are also positive and even possibly higher. But the longer-term effects are typically negative in emerging economies. </div></td></tr>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Controlling inflation===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Controlling inflation===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;"></del></div></td><td colspan="2" class="diff-side-added"></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>In the 1970s Keynesian economists considered inflation to be mainly the consequence of existing wage bargaining systems, and recommended incomes policies as a means of control. Incomes policies were tried in the USA and in Britain, but never had more than a brief transitory effect on inflation. On the contrary, their ineffectiveness sometimes generated adverse inflationary expectations that caused people to behave in ways that gave impetus to the growth of inflation. As already noted, attempts to control inflation by setting money supply targets were also unsuccessful. Current practice, described below, uses published inflation rate targets and attempts to meet them using the Central Banks' power to control interest rates.</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>In the 1970s Keynesian economists considered inflation to be mainly the consequence of existing wage bargaining systems, and recommended incomes policies as a means of control. Incomes policies were tried in the USA and in Britain, but never had more than a brief transitory effect on inflation. On the contrary, their ineffectiveness sometimes generated adverse inflationary expectations that caused people to behave in ways that gave impetus to the growth of inflation. As already noted, attempts to control inflation by setting money supply targets were also unsuccessful. Current practice, described below, uses published inflation rate targets and attempts to meet them using the Central Banks' power to control interest rates.</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Current monetary policy===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Current monetary policy===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;"></del></div></td><td colspan="2" class="diff-side-added"></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Under normal circumstances, [[monetary policy]] is nowadays targeted directly upon the [[inflation]] rate and aims to maintain it within predetermined limits. It operates by use of the [[central bank]]s power to control [[interest rate]]s <ref> [http://www.bankofengland.co.uk/publications/other/monetary/bean070413.pdf Charles Bean ''Is There a Consensus in Monetary Policy?'']</ref>.). Briefly, an increase in interest rates discourages borrowing and encourages savings. Because borrowers spend more than savers, it discourages consumer spending, and higher mortgage payments reinforce its effect by leaving householders with less to spend. Since it takes about a year for interest rate changes to affect output and two years to affect inflation, policy action depends upon judgements of forthcoming inflation. The authorities make use of [[economic forecasting models]] to assist those judgements, but they usually take account also of a range of factors including inflationary expectations (as indicated by the differences between the prices of fixed-interest and index-linked bonds) and the state of the housing market. Regulatory action depends mainly upon empirical data concerning the relation between the inflation rate and the ''output gap'' such as is embodied in the ''Taylor Rule''<ref>John B Taylor "Discretion versus Policy Rules in Practice", in ''Carnegie-Rochester Conference Series on Public Policy'' no 39 1993 [http://www.stanford.edu/~johntayl/Papers/Discretion.PDF] </ref><ref>[http://www.stanford.edu/~johntayl/PolRulLink.htm Stanford University Monetary Policy Rule Homepage]</ref>.</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Under normal circumstances, [[monetary policy]] is nowadays targeted directly upon the [[inflation]] rate and aims to maintain it within predetermined limits. It operates by use of the [[central bank]]s power to control [[interest rate]]s <ref> [http://www.bankofengland.co.uk/publications/other/monetary/bean070413.pdf Charles Bean ''Is There a Consensus in Monetary Policy?'']</ref>.). Briefly, an increase in interest rates discourages borrowing and encourages savings. Because borrowers spend more than savers, it discourages consumer spending, and higher mortgage payments reinforce its effect by leaving householders with less to spend. Since it takes about a year for interest rate changes to affect output and two years to affect inflation, policy action depends upon judgements of forthcoming inflation. The authorities make use of [[economic forecasting models]] to assist those judgements, but they usually take account also of a range of factors including inflationary expectations (as indicated by the differences between the prices of fixed-interest and index-linked bonds) and the state of the housing market. Regulatory action depends mainly upon empirical data concerning the relation between the inflation rate and the ''output gap'' such as is embodied in the ''Taylor Rule''<ref>John B Taylor "Discretion versus Policy Rules in Practice", in ''Carnegie-Rochester Conference Series on Public Policy'' no 39 1993 [http://www.stanford.edu/~johntayl/Papers/Discretion.PDF] </ref><ref>[http://www.stanford.edu/~johntayl/PolRulLink.htm Stanford University Monetary Policy Rule Homepage]</ref>.</div></td></tr>
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</table>imported>Meg Taylorhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=296330&oldid=previmported>Nick Gardner: /* Policy aims */2013-03-03T12:14:40Z<p><span dir="auto"><span class="autocomment">Policy aims</span></span></p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''Economic Policy'''==</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''Economic Policy'''==</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Policy aims===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Policy aims===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>[[Macroeconomic policy]] is concerned with the policy aim of achieving stability of economic activity and of the price level, and with the policy aim of achieving growth of the country's economic well-being<del style="font-weight: bold; text-decoration: none;">. According to the current ([[neoclassical economics]]) consensus, both aims are well served by the effective working of [[competition]] in markets for goods and services. That is because competitive markets have the flexibility to respond to external shocks to the economy and because they promote [[economic efficiency]] and facilitate growth by directing economic resources into activities that improve [[economic welfare]]. Consequently, many of the policy actions considered are concerned either with the removal of obstacles to market competition, or with the promotion of [[economic efficiency]] in activities that cannot normally be traded (such as defence and public health)</del>. The policy instruments by which those aims can be pursued fall into the three categories of public expenditure, taxation and regulation.</div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>[[Macroeconomic policy]] is concerned with the policy aim of achieving stability of economic activity and of the price level, and with the policy aim of achieving growth of the country's economic well-being. The policy instruments by which those aims can be pursued fall into the three categories of public expenditure, taxation and regulation.</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Public expenditure===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Public expenditure===</div></td></tr>
</table>imported>Nick Gardnerhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=296328&oldid=previmported>Nick Gardner: /* Policy aims */2013-03-03T12:12:57Z<p><span dir="auto"><span class="autocomment">Policy aims</span></span></p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''Economic Policy'''==</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''Economic Policy'''==</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Policy aims===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Policy aims===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;">Applied macroeconomics </del>is concerned with the policy aim of achieving stability of economic activity and of the price level, and with the policy aim of achieving growth of the country's economic well-being. According to the current ([[neoclassical economics]]) consensus, both aims are well served by the effective working of [[competition]] in markets for goods and services. That is because competitive markets have the flexibility to respond to external shocks to the economy and because they promote [[economic efficiency]] and facilitate growth by directing economic resources into activities that improve [[economic welfare]]. Consequently, many of the policy actions considered are concerned either with the removal of obstacles to market competition, or with the promotion of [[economic efficiency]] in activities that cannot normally be traded (such as defence and public health). The policy instruments by which those aims can be pursued fall into the three categories of public expenditure, taxation and regulation.</div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div><ins style="font-weight: bold; text-decoration: none;">[[Macroeconomic policy]] </ins>is concerned with the policy aim of achieving stability of economic activity and of the price level, and with the policy aim of achieving growth of the country's economic well-being. According to the current ([[neoclassical economics]]) consensus, both aims are well served by the effective working of [[competition]] in markets for goods and services. That is because competitive markets have the flexibility to respond to external shocks to the economy and because they promote [[economic efficiency]] and facilitate growth by directing economic resources into activities that improve [[economic welfare]]. Consequently, many of the policy actions considered are concerned either with the removal of obstacles to market competition, or with the promotion of [[economic efficiency]] in activities that cannot normally be traded (such as defence and public health). The policy instruments by which those aims can be pursued fall into the three categories of public expenditure, taxation and regulation.</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
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</table>imported>Nick Gardnerhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=296326&oldid=previmported>Nick Gardner: /* The output gap */2013-03-01T22:10:16Z<p><span dir="auto"><span class="autocomment">The output gap</span></span></p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The output gap===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The output gap===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>The difference between the actual and the [[natural rate of unemployment]] is related to the difference between actual and potential output according to [[Okun's law]] <ref> Martin Prachowny "Okun's Law: Theoretical Foundations and Revised Estimates". ''The Review of Economics and Statistics,'' Vol. 75, No. 2. (May, 1993), pp. 331-336 </ref>, and the monetarist alternative attributed to [[Milton Friedman]]<ref>[http://world-economics-journal.com Tim Congdon: "Two Concepts of the Output Gap", ''World Economics vol 9 n'Jan-Mar 2008]</ref>. And the difference between actual and potential output, known as the [[output gap]], is a factor affecting inflation. That is the basis of the [[Monetary policy/Addendum#The Taylor rule|Taylor rule]] which can be regarded as a version of the [[Phillips curve]] in which it is the output gap rather than the unemployment rate that determines the inflation rate. Estimates of the size of the output gap can be subject to a significant degree of uncertainty<ref>[http://budgetresponsibility.independent.gov.uk/wordpress/docs/briefing%20paper%20No2%20FINAL.pdf Estimating the output gap. UK Office of Budget Responsibility, April 2011]</ref><ref>[http://ftalphaville.ft.com/2012/10/04/1191411/why-the-uk-output-gap-could-be-a-chasm/ Izabella Kaminska, ''Why the UK output gap could be a chasm'', FT Alphaville, Oct 4 2012<del style="font-weight: bold; text-decoration: none;">}</del></ref></div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The difference between the actual and the [[natural rate of unemployment]] is related to the difference between actual and potential output according to [[Okun's law]] <ref> Martin Prachowny "Okun's Law: Theoretical Foundations and Revised Estimates". ''The Review of Economics and Statistics,'' Vol. 75, No. 2. (May, 1993), pp. 331-336 </ref>, and the monetarist alternative attributed to [[Milton Friedman]]<ref>[http://world-economics-journal.com Tim Congdon: "Two Concepts of the Output Gap", ''World Economics vol 9 n'Jan-Mar 2008]</ref>. And the difference between actual and potential output, known as the [[output gap]], is a factor affecting inflation. That is the basis of the [[Monetary policy/Addendum#The Taylor rule|Taylor rule]] which can be regarded as a version of the [[Phillips curve]] in which it is the output gap rather than the unemployment rate that determines the inflation rate. Estimates of the size of the output gap can be subject to a significant degree of uncertainty<ref>[http://budgetresponsibility.independent.gov.uk/wordpress/docs/briefing%20paper%20No2%20FINAL.pdf Estimating the output gap. UK Office of Budget Responsibility, April 2011]</ref><ref>[http://ftalphaville.ft.com/2012/10/04/1191411/why-the-uk-output-gap-could-be-a-chasm/ Izabella Kaminska, ''Why the UK output gap could be a chasm'', FT Alphaville, Oct 4 2012<ins style="font-weight: bold; text-decoration: none;">]</ins></ref></div></td></tr>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Disequilibrium===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Disequilibrium===</div></td></tr>
</table>imported>Nick Gardnerhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=296332&oldid=previmported>Nick Gardner: /* The output gap */2013-03-01T22:06:51Z<p><span dir="auto"><span class="autocomment">The output gap</span></span></p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The output gap===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The output gap===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>The difference between the actual and the [[natural rate of unemployment]] is related to the difference between actual and potential output according to [[Okun's law]] <ref> Martin Prachowny "Okun's Law: Theoretical Foundations and Revised Estimates". ''The Review of Economics and Statistics,'' Vol. 75, No. 2. (May, 1993), pp. 331-336 </ref>, and the monetarist alternative attributed to [[Milton Friedman]]<ref>[http://world-economics-journal.com Tim Congdon: "Two Concepts of the Output Gap", ''World Economics vol 9 n'Jan-Mar 2008]</ref>. And the difference between actual and potential output, known as the [[output gap]], is a factor affecting inflation. That is the basis of the [[Monetary policy/Addendum#The Taylor rule|Taylor rule]] which can be regarded as a version of the [[Phillips curve]] in which it is the output gap rather than the unemployment rate that determines the inflation rate.</div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The difference between the actual and the [[natural rate of unemployment]] is related to the difference between actual and potential output according to [[Okun's law]] <ref> Martin Prachowny "Okun's Law: Theoretical Foundations and Revised Estimates". ''The Review of Economics and Statistics,'' Vol. 75, No. 2. (May, 1993), pp. 331-336 </ref>, and the monetarist alternative attributed to [[Milton Friedman]]<ref>[http://world-economics-journal.com Tim Congdon: "Two Concepts of the Output Gap", ''World Economics vol 9 n'Jan-Mar 2008]</ref>. And the difference between actual and potential output, known as the [[output gap]], is a factor affecting inflation. That is the basis of the [[Monetary policy/Addendum#The Taylor rule|Taylor rule]] which can be regarded as a version of the [[Phillips curve]] in which it is the output gap rather than the unemployment rate that determines the inflation rate. <ins style="font-weight: bold; text-decoration: none;">Estimates of the size of the output gap can be subject to a significant degree of uncertainty<ref>[http://budgetresponsibility.independent.gov.uk/wordpress/docs/briefing%20paper%20No2%20FINAL.pdf Estimating the output gap. UK Office of Budget Responsibility, April 2011]</ref><ref>[http://ftalphaville.ft.com/2012/10/04/1191411/why-the-uk-output-gap-could-be-a-chasm/ Izabella Kaminska, ''Why the UK output gap could be a chasm'', FT Alphaville, Oct 4 2012}</ref></ins></div></td></tr>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Disequilibrium===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Disequilibrium===</div></td></tr>
</table>imported>Nick Gardnerhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=296320&oldid=previmported>Nick Gardner: /* The output gap */2012-12-10T22:14:43Z<p><span dir="auto"><span class="autocomment">The output gap</span></span></p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The output gap===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===The output gap===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>The difference between the actual and the natural rate of unemployment is related to the difference between actual and potential output according to '<del style="font-weight: bold; text-decoration: none;">'Okun’s Law'' </del> <ref> Martin Prachowny "Okun's Law: Theoretical Foundations and Revised Estimates". ''The Review of Economics and Statistics,'' Vol. 75, No. 2. (May, 1993), pp. 331-336 </ref>, and the monetarist alternative attributed to Friedman <ref>[http://world-economics-journal.com Tim Congdon: "Two Concepts of the Output Gap", ''World Economics vol 9 <del style="font-weight: bold; text-decoration: none;">no 1'</del>'Jan-Mar 2008]</ref>. And the difference between actual and potential output, known as <del style="font-weight: bold; text-decoration: none;">''</del>the output gap<del style="font-weight: bold; text-decoration: none;">''</del>, is a factor affecting inflation. That is the basis of the <del style="font-weight: bold; text-decoration: none;">''</del>Taylor <del style="font-weight: bold; text-decoration: none;">Rule'' </del> <del style="font-weight: bold; text-decoration: none;">referred to below, </del>which can be regarded as a version of the Phillips curve in which it is the output gap rather than the unemployment rate that determines the inflation rate.</div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>The difference between the actual and the <ins style="font-weight: bold; text-decoration: none;">[[</ins>natural rate of unemployment<ins style="font-weight: bold; text-decoration: none;">]] </ins> is related to the difference between actual and potential output according to <ins style="font-weight: bold; text-decoration: none;">[[Okun</ins>'<ins style="font-weight: bold; text-decoration: none;">s law]] </ins> <ref> Martin Prachowny "Okun's Law: Theoretical Foundations and Revised Estimates". ''The Review of Economics and Statistics,'' Vol. 75, No. 2. (May, 1993), pp. 331-336 </ref>, and the monetarist alternative attributed to <ins style="font-weight: bold; text-decoration: none;">[[Milton </ins>Friedman<ins style="font-weight: bold; text-decoration: none;">]]</ins><ref>[http://world-economics-journal.com Tim Congdon: "Two Concepts of the Output Gap", ''World Economics vol 9 <ins style="font-weight: bold; text-decoration: none;">n</ins>'Jan-Mar 2008]</ref>. And the difference between actual and potential output, known as the <ins style="font-weight: bold; text-decoration: none;">[[</ins>output gap<ins style="font-weight: bold; text-decoration: none;">]]</ins>, is a factor affecting inflation. That is the basis of the <ins style="font-weight: bold; text-decoration: none;">[[Monetary policy/Addendum#The Taylor rule|</ins>Taylor <ins style="font-weight: bold; text-decoration: none;">rule]] </ins> which can be regarded as a version of the <ins style="font-weight: bold; text-decoration: none;">[[</ins>Phillips curve<ins style="font-weight: bold; text-decoration: none;">]] </ins>in which it is the output gap rather than the unemployment rate that determines the inflation rate.</div></td></tr>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Disequilibrium===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Disequilibrium===</div></td></tr>
</table>imported>Nick Gardnerhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=296324&oldid=previmported>Nick Gardner: /* Dissenting views */2012-11-27T09:40:33Z<p><span dir="auto"><span class="autocomment">Dissenting views</span></span></p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Among dissenting views are those of:</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>Among dissenting views are those of:</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>*economists of the [[Austrian School]] who consider the economy to be too complex to justify the use of macroeconomic aggregates, and who use logical deductions from axioms rather than induction from economic statistics;</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>*economists of the [[Austrian School]] who consider the economy to be too complex to justify the use of macroeconomic aggregates, and who use logical deductions from axioms rather than induction from economic statistics;</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>*[[sustainability]] advocates who favour restricting or halting economic growth in order to preserve resources for the use of future generations; </div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>*[[sustainability]] advocates who favour restricting or halting economic growth in order to preserve resources for the use of future generations;</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div><del style="font-weight: bold; text-decoration: none;">* proponents of [[public choice theory]] who consider people in government to be motivated by their own interests rather than those that they purport to represent.</del></div></td><td colspan="2" class="diff-side-added"></td></tr>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''References'''==</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>=='''References'''==</div></td></tr>
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</table>imported>Nick Gardnerhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=296322&oldid=previmported>Nick Gardner: /* Regulation */2012-11-27T09:37:37Z<p><span dir="auto"><span class="autocomment">Regulation</span></span></p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Regulation===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Regulation===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>In most countries, regulatory policy has significant positive and negative effects upon economic efficiency, output and growth. On the positive side is the basic framework of laws, regulations and codes of practice without which economic activity on the modern scale would not be possible. Without an effective system of law-enforcement and an accepted way of settling disputes,for example, much activity would be diverted from production and exchange into defence against violence. Also on the positive side <del style="font-weight: bold; text-decoration: none;">– or potentially so – </del>are measures to promote competition, either by removing barriers, as in the case of [[antitrust]] or [[competition policy]], or by providing consumers with information that they would otherwise lack, as in the case of product standards. <del style="font-weight: bold; text-decoration: none;"> In the case of ''natural monopolies'', and otherwise in absence of effective competition, regulations can be used to limit the extent of anti-competitive behaviour. </del>Growth may also be facilitated by systems of [[patent law]] that provide incentives to innovation that might otherwise be lacking. Offsetting the benefits in every case are the costs to companies and individuals of complying with the regulations. On the negative side as far as macroeconomic considerations are concerned, are <del style="font-weight: bold; text-decoration: none;">the many </del>regulations that yield no economic benefit, and those whose costs exceed their benefits. Among them are regulations that prohibit innovation on the grounds of the mere possibility of harm – as advocated in the more extreme interpretations of the [[precautionary principle]] – and safety regulations that are based upon mistaken estimates of the <del style="font-weight: bold; text-decoration: none;">expected (probability-weighted) </del> negative value of the events against which they guard<ref>Aaron Wildavsky ''Searching for Safety'' Transaction Publishers , 1988</ref> .</div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>In most countries, regulatory policy has significant positive and negative effects upon economic efficiency, output and growth. On the positive side is the basic framework of laws, regulations and codes of practice without which economic activity on the modern scale would not be possible. Without an effective system of law-enforcement and an accepted way of settling disputes,for example, much activity would be diverted from production and exchange into defence against violence. Also on the positive side <ins style="font-weight: bold; text-decoration: none;"> </ins>are measures to promote competition, either by removing barriers, as in the case of [[antitrust]] or [[competition policy]], or by providing consumers with information that they would otherwise lack, as in the case of product standards. <ins style="font-weight: bold; text-decoration: none;"> </ins>Growth may also be facilitated by systems of [[patent law]] that provide incentives to innovation that might otherwise be lacking. Offsetting the benefits in every case are the costs to companies and individuals of complying with the regulations. On the negative side as far as macroeconomic considerations are concerned, are <ins style="font-weight: bold; text-decoration: none;"> </ins>regulations that yield no economic benefit, and those whose costs exceed their benefits. Among them are regulations that prohibit innovation on the grounds of the mere possibility of harm – as advocated in the more extreme interpretations of the [[precautionary principle]] – and safety regulations that are based upon mistaken estimates of the negative value of the events against which they guard<ref>Aaron Wildavsky ''Searching for Safety'' Transaction Publishers , 1988</ref> .</div></td></tr>
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</table>imported>Nick Gardnerhttps://citizendium.org/wiki/index.php?title=Macroeconomics&diff=296334&oldid=previmported>Nick Gardner: /* Taxation */2012-11-27T09:31:42Z<p><span dir="auto"><span class="autocomment">Taxation</span></span></p>
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<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Taxation===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Taxation===</div></td></tr>
<tr><td class="diff-marker" data-marker="−"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #ffe49c; vertical-align: top; white-space: pre-wrap;"><div>There is evidence to suggest that [[taxation]] can reduce economic output and growth in a number of different ways. Redistributive taxes can reduce private savings and investment because the rich save more than the poor. Income tax and social security contributions can reduce employment and output because the difference that they create between what employers pay and what employees receive, reduces work incentives. Other taxes can distort [[supply and demand]] relationships in other markets to the detriment of economic efficiency. According to an OECD working paper <ref> [http://www.oecd.org/dataoecd/33/25/1863834.pdf Leibfritz et al, OECD Working Paper No. 176 1997 ''Taxation and Economic Performance''] </ref>, however, a review of published evidence indicates that “the effects of taxes on economic performance are ambiguous in some areas and unsettled and controversial in others” The only unequivocal policy conclusion that emerges from the evidence is that economic performance is best served by taxes that do not distort incentives such as a poll tax or a tax on land values. <del style="font-weight: bold; text-decoration: none;">(Exceptions may arise, however, when the incentives promoted are used as an alternative to the economically positive regulations referred to in the next paragraph.)</del></div></td><td class="diff-marker" data-marker="+"></td><td style="color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #a3d3ff; vertical-align: top; white-space: pre-wrap;"><div>There is evidence to suggest that [[taxation]] can reduce economic output and growth in a number of different ways. Redistributive taxes can reduce private savings and investment because the rich save more than the poor. Income tax and social security contributions can reduce employment and output because the difference that they create between what employers pay and what employees receive, reduces work incentives. Other taxes can distort [[supply and demand]] relationships in other markets to the detriment of economic efficiency. According to an OECD working paper <ref> [http://www.oecd.org/dataoecd/33/25/1863834.pdf Leibfritz et al, OECD Working Paper No. 176 1997 ''Taxation and Economic Performance''] </ref>, however, a review of published evidence indicates that “the effects of taxes on economic performance are ambiguous in some areas and unsettled and controversial in others” The only unequivocal policy conclusion that emerges from the evidence is that economic performance is best served by taxes that do not distort incentives<ins style="font-weight: bold; text-decoration: none;">, </ins>such as a poll tax or a tax on land values.</div></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><br/></td></tr>
<tr><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Regulation===</div></td><td class="diff-marker"></td><td style="background-color: #f8f9fa; color: #202122; font-size: 88%; border-style: solid; border-width: 1px 1px 1px 4px; border-radius: 0.33em; border-color: #eaecf0; vertical-align: top; white-space: pre-wrap;"><div>===Regulation===</div></td></tr>
</table>imported>Nick Gardner