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December 30, 2009

Macro mix up

It appears many people are questioning the functioning of our economy, given the bad recession we've been through. Some say we need a new theory or structure for our national economy. Is this causing much debate within economic circles?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"It is, and we've seen this historically whenever we've had a major economic crisis. If we look at the 1930s - the Great Depression - that sparked what economists call a Keynesian revolution, a very activist role for the government in trying to reduce recessions. We also saw this in the 1970s. That was a decade where there were many economic challenges. That really sparked what's now called supply side economics, which became very popular, especially in the 1980s. So I think we do typically have this kind of debate, particularly about the role of government in dealing with recessions and the macro economy. And of course, as always we're going to have many different sides. On one side, we're going to have those who say what we need is more activist government. We need perhaps more regulation of the macro economy to prevent the kind of downturns we've seen in the last couple of years. At the other end of the spectrum, we see people who say - and very learned people on both sides - people who say no, we need actually less government intervention. We need to have the market decide. If the market decides, perhaps that will head off some of these economic catastrophes. This debate really goes to the core of how our economy operates, and for a professional economist like me, it's going to be very interesting to see how the current version of this debate unfolds in the coming years."

Posted by Dave at December 30, 2009 08:00 AM