Money and Government (Paperback)

Some parts of the book

Introduction
I. UNSETTLED ISSUES
Macroeconomics is about money and government, and their relation- ship. The unsettled questions in macroeconomic policy stem from disputes about the part money plays in economic life, and the part gov- ernment should play. For 250 years, the dominant view of the economic profession has been that money is of no importance except when it gets 'out of order', and that government interference with the market usually makes things worse. 'You can't buck the market,' Mrs Thatcher fam- ously declared. A competitive market economy, it was claimed, has an automatic tendency to full employment. Disturbances to employment are the result of interference, usually by or at the behest of governments, creating or promoting monopolies, impeding price adjustments or, cru- cially, by 'monkeying around' with the money supply, thus inducing people to trade at the wrong prices. At first it was believed that control of money should be entrusted to the gold standard; when the gold stand- ard broke down, to independent central banks. Government should be limited to ensuring the conditions required for efficient market exchange. The only task of macro policy was to control the money supply.