SOME OBSERVATIONS ON COUNTERCYCLICAL
FISCAL POLICY AND ITS EFFECTS ON
ECONOMIC GROWTH

TRYGVE JAAVELMO
l'niversitetet à Oslo - Oslo - Norge

{NTRODUCTORY REMARKS

A leading idea in « Post-Keynesian » economic thinking
has been the strong emphasis on fiscal policy as a means of
steering an economy towards full and efficient use of its resources.
 But for this purpose, it is held, the policy must be
« radical » and « unorthodox », and not of the old-fashioned,
balanced-budget type. The line of reasoning, stated briefly,
seems to run approximately as follows: « Orthodox » fiscal
nolicy based on a balanced budget and relatively modest economic
 activity on the part of the state is responsible for unemployment
 and waste of resources during business depressions.
The task of a good fiscal policy should be to keep effective
demand high enough — if necessary through very large budget
deficits — in order to maintain full employment also when
private investment activity is low. Even more far-reaching
is the particular ideology that often seems to accompany this
kind of reasoning, viz. that a government actually has fulfilled
 its main obligations as an economic policy-maker if i
adheres to a fiscal policy as described.

Haavelmo - pag.