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Updated: Mar 16, 2022


This chapter argues that imperfections in the working of individual (nonfinancial) markets are not a clear source of macroeconomic instability and that better regulation of these markets is not the way to stabilize the economy. Improvement here means both increased surveillance and removing government-fostered deficiencies. The basic arguments are (1) the long-standing disarray that distinguishes macroeconomics from microeconomics greatly increased starting in the 1970s, (2) great dispute exists over the workability of different ‘classic’ macroeconomic measures, (3) despite at least seven decades of advocacy of microeconomic measures for macroeconomic goals, no defensible case exists, (4) support for microeconomic measures rest on a belief in a high degree of market failure about which macroeconomists have become more skeptical, (5) these weaknesses imply that no clear macroeconomic benefits offset the microeconomic drawbacks of regulations of individual markets and (6) extensive deregulation would produce substantial microeconomic and macroeconomic benefits, but the microeconomic case is much stronger.

Keywords: Macroeconomics, Keynes, Law, and Economics

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