15.3 Conclusion: Making Policy in an Uncertain World

In this chapter we have examined whether policy should take an active or passive role in responding to economic fluctuations and whether policy should be conducted by rule or by discretion. There are many arguments on both sides of these questions. Perhaps the only clear conclusion is that there is no simple and compelling case for any particular view of macroeconomic policy. In the end, you must weigh the various arguments, both economic and political, and decide for yourself what kind of role the government should play in trying to stabilize the economy.

For better or worse, economists play a key role in the formulation of economic policy. Because the economy is complex, this role is often difficult. Yet it is also inevitable. Economists cannot sit back and wait until our knowledge of the economy has been perfected before giving advice. In the meantime, someone must advise economic policymakers. That job, difficult as it sometimes is, falls to economists.


The role of economists in the policymaking process goes beyond giving advice to policymakers. Even economists cloistered in academia influence policy indirectly through their research and writing. In the conclusion of The General Theory, John Maynard Keynes wrote that

the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

This is as true today as it was when Keynes wrote it in 1936—except now that academic scribbler is often Keynes himself.