If we don’t have ups and downs, or the boom/bust of business cycle, but a steady economy with growth economy, isn’t this a better environment for most businesses? Would this be better for a business to project what is ahead and use their capital more efficiently? Would a business still have to reserve precious capitals for the worse case scenario such as a meltdown? Under this scenario, demands are not artificially heighten, but real demands. I am still playing with this idea.
On the baby-sitting case study from the article where not enough demand led to recession; well, we have social safety net such as unemployment and SS to spur consumer demands, hence more jobs. What I am hoping, is that as American consumers whining-down on shopping and step-up on savings as the result of this meltdown and gloomy job outlook, the rest of the Developing Worlds such as China, India, Russia and South America will step in.
AS for the future of economist, here’s a suggestion, instead of religiously followed a theory, why don‘t you set a goal to achieve, then applied whatever tools there are to achieve such goal. Example: Let’s say a stable and with growth economy is the best course for our country such we remain competitive in this globalized economy, instead of a boom/bust business cycle, then applied whatever that best achieve such goal, can be better regulation, new tools for the Fed, tools from Keynes or neoclassical, etc…..don’t just follow a theory like it is a religion. It needs to work in real life!
Being religious about the practice of Free Market Capitalism is what got 100s of millions of people all over the world suffer. And now all I see is a bunch of supercilious economists, after such calamity while 100s of millions of people suffering, still want to say Free Market Capitalism is the right economy theory for our economy.