There would be little point in any proposals for social provision of various kinds of goods and services which did not attempt to take seriously the economic constraints on such provision. Such constraints simply do exist and do matter and to pretend otherwise would be to engage in self-indulgent fantasy. Moreover, in so far as economic policies can tighten or relax such economic constraints, there can be a political economy dimension to the limitations faced by proposals for social provision and these limits too must be recognized, even if they are somewhat fluid and hard to pin down. (Recognition of such political economy aspects, however, must not lead one to suppose that economic constraints are simply reducible to political constraints; they are not, as will emerge below.) The purpose of this chapter is to draw attention, in an informal and non-technical way, to at least some elements of the relevant pattern of economic constraints — and it will serve its purpose only if its elementary and introductory nature is acknowledged. Certainly no economist will find anything of interest in this chapter.
KeywordsMonetary Policy Actual Output Economic Constraint Closed Economy Effective Demand
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