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Economic Policy: Credible Commitments
By W. Lee Hoskins
Introduction
Economic policy may be coming full circle: the long view is again gaining acceptance and short-term policy adjustments are losing currency. Schumpeter and Hayek are mentioned by economic pundits with increasing frequency and Keynes' sarcastic comment that in the long run we are all dead fails to carry the day for short-term policies aimed at managing an economy supposedly suffering from assorted macro maladies. Monetary policy seems more focused on a long-term objective of price stability than on any other objective. Fiscal policy, while lacking an objective, must continue to be separated from monetary policy despite some resurgent research from the fiscal dominance crowd. And whether the economy is new or old there is no substitute in terms of economic welfare for a credible commitment to long-term policy objectives for both monetary and fiscal policy.
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