The Short and the Long Runs

Chapter 12 was devoted to the study of how government manages short-term economic fluctuations. This policy is not difficult to justify, at least on the surface. Economic downturns cause some people, often seemingly randomly and unfairly, to bear the costs of losing jobs. Sometimes downturns pass with little pain, sometimes (the 1930s, the years after 2007) they endure. Assuming the flow of technological innovation doesn’t come to a permanent halt, which it never has before in human history (and especially since 1780), the economy will eventually right itself. But how long must we wait? Keynes himself ...

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