The Debate Over Stabilization Policy

This 1986 book examines some of the main issues that have characterized macroeconomics: the debate between 'monetarists' and 'Keynesians'; the response to demand shocks and supply shocks, by which the monetary authorities control aggregrate nominal income and the use and relevance of the money supply as a target; and the consumption function and the determinants of wealth. It shows that Keynesian stabilization policies succeeded in reducing instability due to demand shocks dramatically, but that no aggregrate demand policy can stabilize both price and employment simultaneously after a supply shock. However, by assigning an overall 'social cost' to (excess) unemployment and (initially) unexpected inflation, an optimism path can be derived. In looking at the consumption function and determinants of wealth the empirical evidence is shown to be most consistent with the life-cycle hypothesis. A concluding section is devoted to the impact on private and national society of the 'social security revolution'.

Foreword; 1. First lecture: Keynesianism, Monetarism, and the case for and against active stabilization policies; 2. Second lecture: aggregate demand and the control of the inflationary process; 3. Third lecture: the monetary mechanism revisited and its relations with the financial structure; 4. Fourth lecture: the accumulation of individual and national wealth and the role of social security; 5. Discussion; 6. Comments; 7. Biography of Franco Modigliani; References; Index.

This 1986 book examines some of the main issues that have characterised macroeconomics: the debate between 'monetarists' and 'Keynesians'; the response to demand and supply shocks, by which the monetary authorities control aggregrate nominal income; and the consumption function and the determinants of wealth.