Customer Reviews

The Economic Policy Beyond the Headlines

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George P. Shultz is one of the most distinguished government officials in U.S. history, but this book was a bit of a disappointment. It was first published during the 1970s, and much of its material deals with that era. The contents of the 1998 second edition do not appear to have been updated. E.g., the chapter on tax policy does not mention the tax reforms implemented during the 1980s, or the 1990 and 1993 tax increases (ch. 3). The chapter on income security does not include the 1983 Social Security amendments or the welfare reform of the 1990s (ch. 5). There is no mention of NAFTA in the chapter on international trade (ch. 7), and no mention of the National Economic Council in the chapter on the apparatus of economic policy making (ch. 8).

Substantively, there is not much with which to quibble. The federal budget process is too cumbersome for fiscal stabilization policy to be effective (ch. 2). Simplification of the tax code is economically desirable but politically unlikely (ch. 3). Price controls are ineffective as a means of controlling inflation (ch. 4). The "crazy quilt" (p. 88) of existing income security programs would benefit from being replaced by a negative income tax as proposed by Milton Friedman (ch. 5). During the 1970s, the world switched from a fixed to a floating exchange-rate system (ch. 6). Free trade leads to higher standards of living than does protectionism (ch. 7). Organization affects policy decisions, but continual reorganization does not substitute for them (ch. 8). Government intervention, e.g. with energy policy, thwarts the self-correcting mechanisms of free markets (ch. 9). Government's most effective economic policy is to provide a stable framework within which markets can operate (ch. 10).

The authors' main focus is the Keynesian trade-off between inflation and unemployment. Clearly, economic theory and policy have both progressed since the book was first published. New edition or not, its material has simply become out of date. The only apparent addition to the 1998 version of the book is one new chapter, which would have worked better if the authors had published that separately elsewhere.

An excellent discussion of how economic theory meets politics. Explains why we have the problems we do, and what some of the root causes may be. Also has some good insight for how the federal government functions in general.