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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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6. Counter-Cyclical Policy

Irrational exuberance, of the kind that was in evidence in the US and elsewhere during the 1990s and again in the early 2000s, can easily turn the normal cycle of expansion and contraction into a more dangerous process of bubble and collapse. This is not, however, the main differentiating factor between these two kinds of economic cycle. At a more basic level, it is government policy that makes the difference between relative economic stability and the violent instability that can threaten to tear society apart* . In essence, although the economy may be intrinsically cyclical over time, intelligent policy can dampen out the amplitude of this cycle, thereby reducing the chances that the downward part of the cycle will ...

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