On the new Cambridge school
A simple macroeconomic model may be used to enunciate some of the key propositions of the "New Cambridge School" (NCS), and especially to identify and emphasize their breaks with Keynes' vision of the economic system. The penultimate section of the paper contains a simplified version of the NCS view of the relationship between the budget deficit and the trade deficit. For ease of exposition I deal only with real magnitudes and neglect time lags throughout.
Godley Moves in Mysterious Ways: The Craft of Economic Judgment in Post-war Britain
Economists are not memorialized in monuments. Wynne Godley is the exception, his likeness is cast in bronze upon Coventry Cathedral as archangel Michael (‘St Michael’s Victory over the Devil’, 1958) in a sculpture by his father-in-law Jacob Epstein. On his passing, Godley was remembered in obituaries in the major British broadsheets, that recalled his dotted career, his engagement with the arts, his grace as a host and his tragic family history.1 At the venerable age of 75, Godley penned an essay to the London Review of Books on his battles, four decades earlier, with an abusive psychoanalyst (Godley 2001). If one were to write Godley’s biography (and I know of no such plans) the defining features of his character would be taken from this autobiographical account: a search for his true voice, and as he took many public roles, a nagging fear that he might disappoint such responsibilities. The tensions that made up the intimate structures of his psychoanalytic self help also to describe his approach to economics: an anxious affirmation of voice and judgment.
The Debate on Fine-Tuning: the Basic Issues
‘Fine-tuning’ can be defined as frequent discretionary adjustments to policy instruments. This article attempts to isolate this issue from a multiplicity of criticisms directed at UK economic policy-making. The attack on fine-tuning itself by the New Cambridge and the Manchester monetarist schools is shown to be connected essentially with the view that the economy is stable (i.e. returns to equilibrium in the absence of discretionary intervention). Nevertheless, even if the economy is stable, optimal control theory suggests that policy adjustments could be desirable, essentially because they could, at least in principle, speed the return to equilibrium. A more fundamental question concerns the way in which the private sector form their expectations; if they are ‘rational’, that is based on information at least as good as the authorities', then the grounds for discretionary intervention by the authorities are greatly diminished. These issues all require further empirical investigation.