Economic policy as expectations management: Keynes' and Friedman's complementary approaches1. Issue 5 (3rd September 2017)

• Record Type: Journal Article
• Authors: Rivot, Sylvie
• Is Part Of: European journal of the history of economic thought. Volume 24:Issue 5(2017)
• Page Start: 1053
• Page End: 1084
• Publication Date: 2017-09-03
• Subjects: Economic policy -- expectations -- stabilisation; B22 -- B31 -- E40 -- E52 -- E62; Economic history -- Periodicals; 330.94
• DOI: 10.1080/09672567.2017.1323939
• Languages: English
• ISSNs: 0967-2567

Abstract

Abstract: We investigate how Keynes and Friedman, respectively, address the issue of the disequilibria at stake in a monetary economy through a shared concern for the formation of expectations. We show that Keynes was interested in the coordination of long-term expectations regarding non-monetary assets prospective yields, while Friedman focused on the adaptation of short-term nominal expectations. Regarding the remedies to these disequilibria, both economists called for devices that aim to stabilise market expectations. As a direct outcome, Keynes designed policies that aim to stabilise the long-term state of expectations while Friedman basically aimed at the acceleration of the competitive adjustment process.