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The 21st-Century Case for a Managed Economy: The role of disequilibrium, feedback loops and scientific method in post-crash economics by Sean Harkin

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4. Depression and Hyperinflation: Extreme Examples of Feedback

In his influential 1962 book Capitalism and Freedom, Milton Friedman, an intellectual leader of the free-market revival that took place after 1980, commented that, “[t]he Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.” This view reflects a prejudice – popular amongst conservatives – that government is the root of all evil, and it is closely linked with the assumption, inherent in classical economics, that all economic upheaval must result from shocks that are exogenous to the market system. These shocks may take the form of a conflict, natural disaster or resource ...

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