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I don't see the stimuli as the alpha and omega of the Keynesian approach. As Migeru suggested above, we should associate Keynesianism with the problem rather that the solution. The point is not to push the stimuli no matter what is happening. The point is to solve macro-economic problems: if economy is down, it needs to be stimulated (by the state if "economic actors" are unwilling, increased government spending that incidentally requires higher taxes, what else?). If the economy is up, it can be cooled down by... hmmm... higher taxes. The Friedmanian approach is the opposite: if the economy is up, it "needs" to be accelerated further with tax cuts; if it is down, the market ought to revive itself without government intervention. At the end, relevance of taxes is acknowledged by both ideologies - but effectiveness of marginal tax rates probably depends on the cycle phase, and here Keynesians seem to estimate better. After all, the US got into this mess after accelerating bubbles with aggressive tax cuts. Tax cuts just flooded money to chase a series of assets; it didn't trickle down much to regular folks at the boom, and they get no help at the bust. Kenesianism seems to focus on people rather than on investment statistics better.

P.S. My previous comment is mistyped. It should start with
I agree that the US economy was under constant stimulation...

by das monde on Wed Oct 8th, 2008 at 09:35:57 PM EST
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