Selected Essays of James Tobin
Chapter 20: Whatever happened to fiscal policy?
20. Whatever happened to ﬁscal policy?* Bobby Heilbroner and I were undergraduate economics students at Harvard in the late 1930s, I in the class of 1939 and he one year behind, and we both went on to Harvard graduate school. I don’t remember that we were in the same classes, but we certainly grew up in the same exciting intellectual climate of those days on that campus. We and most of our fellow students were attracted to economics by deep concern about the state of the world and by hope that economics could explain what had gone so terribly wrong and point the way to remedies. Capitalism was on trial, and whether it could survive and deserved to survive was far from clear. Democracy and liberty, weakened by economic failures, were under mortal attack. Economics as a social science was in crisis, as its practitioners and apprentices debated how to make it relevant to the fateful times. Harvard was the principal American scene of the Keynesian revolution. The challenges of our student days have shaped our careers, Bob’s and mine, although in quite diﬀerent ways. Bob has thought and written deeply about capitalism and about the relation of our profession to the economic order. He is unique, and we are all greatly in his debt. He and I do have in common the Keynesian lessons we learned or ﬁgured out for ourselves. Among them was the use of ﬁscal policy as a tool of economic stabilization, of minimizing involuntary...
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