Changing Institutions in the European Union

Changing Institutions in the European Union

A Public Choice Perspective

Edited by Giuseppe Eusepi and Friedrich Schneider

This book makes a valuable, analytical contribution to recent debates on the ongoing institutional changes occurring within the European Union. It provides a comprehensive and diverse insight into a variety of areas, including in-depth studies of fiscal, monetary and voting issues, to help elucidate the current period of transitional change.

Chapter 7: A curmudgeon’s view of EMU

Gordon Tullock

Subjects: economics and finance, public choice theory, politics and public policy, public choice

Extract

Gordon Tullock My one course in economics was taught by Henry Simons, and my views on EMU depend on the particular way in which he taught it: half on the market and half on money. My introduction to Keynesian economics came when Simons told me what was wrong with it. He was so convincing that I never actually read The General Theory. Naturally I picked up a good deal of Keynesian economics over time, but I never thought it was a good theory. Simons was, of course, a believer in monetary measures and in particular the desirability of the stable value of money. The method that he favored, 100 per cent reserve banking, was one that I still have a retrospective admiration for, but it has pretty much dropped out of the literature. Keynesianism, which for a while was dominant, has also largely disappeared. I presume the reason is the simultaneous existence of high and increasing unemployment at a time of rising inflation. I can remember when most economists thought that the system suffered from a permanent shortage of demand. It was the government’s duty to provide additional demand and Galbraith actually suggested that only military expenditures would be politically acceptable in creating that demand. Today of course all this is dead. European countries do not seem unduly perturbed by unemployment rates much higher than had ever before been experienced except in extremely serious depressions. There is no suggestion that it be wiped out by ‘an expansion of...

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