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Contemporary American society has the look of a split-level
structure. Its political and social institutions distribute rights
and privileges universally and proclaim the equality of all
citizens. Yet economic institutions, with efficiency as their
guiding principle, create disparities among citizens in living
standards and material welfare. This mixture of equal rights and
unequal economic status breeds tensions between the political
principles of democracy and the economic principles of capitalism.
Whenever the wealthy try for extra helpings of supposedly equal
rights, and whenever the workings of the market deny anyone a
minimum standard of living, ""dollars transgress on rights""-in the
author's phrase. In this revised and expanded version of the Godkin
Lectures presented at the John F. Kennedy School at Harvard
University in April 1974, Arthur M. Okun explores the conflicts
that arise when society's desire to reduce inequality would impair
economic efficiency, confronting policymakers with ""the big
tradeoff."" Other economic systems have attempted to solve this
problem; but the best of socialist experiments have achieved a
greater degree of equality than our mixed capitalist democracy only
at heavy costs in efficiency, and dictatorial governments have
reached heights of efficiency only by rigidly repressing their
citizenry. In contrast, our basic system emerges as a viable, if
uneasy, compromise in which the market has its place and democratic
institutions keep it in check. But within the existing system there
are ways to gain more of one good thing at a lower cost in terms of
the other. In Okun's view, society's concern for human dignity can
be directed at reducing the economic deprivation that stains the
record of American democracy-through progressive taxation, transfer
payments, job programs, broadening equality of opportunity,
eliminating racial and sexual discrimination, and lowering barriers
to access to capital.
During the past decade Arthur M. Okun, like many economists,
focused attention on finding ways to fight inflation without
sacrificing goals of high employment and prosperity. In recent
years the economy has been plagued by stagflation-the simultaneous
persistence of high inflation and high unemployment. Traditional
methods of aggregate demand management that have been reasonably
successful in curing either one or the other of these problems have
not been effective, and the nation has not been able to contain
inflation even in periods of economic slack. It now seems clear
that the economists' traditional model that presumes short-run
flexibility in wages and prices no longer holds for most of the
industrial world, and hence the response of inflation to shifts in
macroeconomic policy is weak. In this volume Okun seeks to explain
that loss of responsiveness by analyzing how modern labor and
product markets work and how they are structured. A central feature
of Okun's analysis is implicit contract theory, which recognizes
that efficiency-maximizing decisions by business firms reflect
long-term considerations as well as short-term changes in markets.
His interpretation of microeconomic behavior and macroeconomic
performance provides a basis for the design of policies to deal
with stagflation.
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Problems of the Modern Economy (Paperback)
Edmund S. Phelps; Edited by Bela A Balassa, William G. Bowen, Edward C. Budd, Edwin Mansfield, …
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R863
R760
Discovery Miles 7 600
Save R103 (12%)
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Ships in 10 - 15 working days
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Contemporary American society has the look of a split-level
structure. Its political and social institutions distribute rights
and privileges universally and proclaim the equality of all
citizens. Yet economic institutions, with efficiency as their
guiding principle, create disparities among citizens in living
standards and material welfare. This mixture of equal rights and
unequal economic status breeds tensions between the political
principles of democracy and the economic principles of capitalism.
Whenever the wealthy try for extra helpings of supposedly equal
rights, and whenever the workings of the market deny anyone a
minimum standard of living, """"dollars transgress on rights""""-in
the author's phrase. In this revised and expanded version of the
Godkin Lectures presented at the John F. Kennedy School at Harvard
University in April 1974, Arthur M. Okun explores the conflicts
that arise when society's desire to reduce inequality would impair
economic efficiency, confronting policymakers with """"the big
tradeoff."""" Other economic systems have attempted to solve this
problem; but the best of socialist experiments have achieved a
greater degree of equality than our mixed capitalist democracy only
at heavy costs in efficiency, and dictatorial governments have
reached heights of efficiency only by rigidly repressing their
citizenry. In contrast, our basic system emerges as a viable, if
uneasy, compromise in which the market has its place and democratic
institutions keep it in check. But within the existing system there
are ways to gain more of one good thing at a lower cost in terms of
the other. In Okun's view, society's concern for human dignity can
be directed at reducing the economic deprivation that stains the
record of American democracy-through progressive taxation, transfer
payments, job programs, broadening equality of opportunity,
eliminating racial and sexual discrimination, and lowering barriers
to access to capital.
Essays discuss the federal budget, taxes, government monetary
policies, and new approaches to solving U.S. economic problems.
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