Thomas Sowell: Janet Yellen and the return of Keynes
Ms. Yellen, a former professor of economics at Berkeley, has openly proclaimed her views on economic policy, and those views deserve very careful scrutiny. She asks: "Will capitalist economies operate at full employment in the absence of routine intervention?" And she answers: "Certainly not."
Ms. Yellen asks: "Do policy-makers have the knowledge and ability to improve macroeconomic outcomes rather than making matters worse?" And she answers: "Yes."
Her first question, whether free market economies can achieve full employment without government intervention, is a purely factual question that can be answered from history. For the first 150 years of the United States, there was no policy of federal intervention when the economy turned down.
Keynesian economists would say that this was exactly the wrong thing to do. History, however, says that unemployment the following year went down to 6.7 percent — and, in the year after that, 2.4 percent.
Thomas Sowell is a senior fellow at the Hoover Institution at Stanford University. His website is www.tsowell.com.
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