Re: Why economists do not care about high rates of unemployment w

[FAC_BROSSER@xxxxxxxxxxxxxxxx]

Paul,
     There is a literature that argues the point you made at
the end, (De Coster and Mitchell, _Journal of Macroeconomics_,
1992, and Dwyer, _Economic Inquiry_, 1992) that laissez-faire is
hunky-dory but that policy intervention can cause chaos.  I note
their models are extremely simplistic and assume linear unique
equilibrium for l-f case, which is not the nonlinear multiple
equilibria situation many of us are concerned with.
     The French literature, including work by Grandmont and
Guesnerie and some non-French types like Evans and Honkapohja
in 1993 _European Economic Review_, shows nonlinear multiple
equilibria models where fiscal policy can steer the economy
onto a stabilizing learning path.  I am skeptical that this is
necessarily manageable easily in reality, but I also would
argue that there is no necessary reason to believe that if
underlying l-f desirable equilibria are unstable, that gov't
efforts to alter the dynamics will make them MORE unstable.
Barkley Rosser
James Madison University