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PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 28
This strong emphasis on fiscal measures as an instrument
of economic policy raises several interesting questions. For
one thing, it seems quite curious that, once possible defects
of an automatic market mechanism are admitted, the explana-
tion should simply be: « wrong fiscal policy ». The choice to
pin all the blame for depressions and idle resources on « old-
fashioned » budget practices alone seems rather arbitrary, in
view of the many other possibilities there are to remold the
economic system by means of policy decisions. Another ques-
tion is whether a flexible budget policy can actually solve the
relatively simple problem of maintaining full employment in
a macroeconomic sense. A constraint in the form of demand
for relatively stable prices could be sufficient to make the
problem very difficult, even hopeless (!). Here we shall, how-
ever, not concern ourselves with these and related questions,
although they are interesting enough. What we want to discuss
is the following more straightforward question.
Let us accept the idea that full employment can be main-
tained by regulating effective demand and that this regulation
can be carried out by means of a policy of deficit spending.
Let us further assume that such a policy can be practiced
without too serious and unwanted side effects in the form of
inflation, reduced labor efficiency, or the like. And let there
also be no minimizing of the tremendous improvement that
such a policy could mean as against the alternative of a passive
laissez faire principle. But this being recognized, there is
still the important question of whether such a full employment
policy would be « optimal » in any reasonable meaning of that
phrase. In other words, is the goal that such a full employment
policy sets itself sufficiently high to satisfy modern requirements
concerning efficient use of a nation’s resources? That is the
question to which the rest of this paper is devoted.
(') Cf. P.A. SAMUELsON and R. Sorow, Analytical Aspects of Anti-infla-
tion Policy. « American Economic Review ». Mav 1060. D. 177-104.
8] Haavelmo - pag. 2
