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Economics in PerspectiveA Critical History$
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John Kenneth Galbraith

Print publication date: 2017

Print ISBN-13: 9780691171647

Published to Princeton Scholarship Online: May 2018

DOI: 10.23943/princeton/9780691171647.001.0001

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Twilight and Evening Bell

Twilight and Evening Bell

(p.290) Chapter 20 Twilight and Evening Bell
Economics in Perspective

John Kenneth Galbraith

Princeton University Press

This chapter examines the decline of Keynesian economics, mainly due to its grave political asymmetry: what was politically possible against deflation and depression was not politically possible or feasible against inflation. Deflation and unemployment called for higher public expenditure and lower taxes, which were very agreeable actions from a political perspective. However, lower government expenditure and higher taxes, which price inflation precisely called for, were not politically agreeable. Furthermore, they were not easily effective against wage-price inflation—the modern form of inflation. The chapter explains how the separation of microeconomics from the purview of Keynesian economics and policy preserved a microeconomic model that could not assume an inflationary role. It also considers some legal efforts to arrest the wage-price spiral, including the Nixon administration's wage and price controls, and Milton Friedman's contribution to the history of economics.

Keywords:   deflation, Keynesian economics, inflation, unemployment, wage-price inflation, microeconomics, Milton Friedman

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