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The Political Business Cycle

The Political Business Cycle Downloaded from https://academic.oup.com/restud/article-abstract/42/2/169/1580972 by guest on 14 October 2019 The Political Business Cycle 1,2 WILLIAM D. NORDHAUS Yale University There are many ways in which today's political choices affect future well-being. Future capital stocks, structures and machinery and roads, depend on the extent to which present generations invest instead of consume. Stocks of natural resources depend on past con­ servation efforts. There are perhaps more subtle ways in which we bequeath our tastes, consumption patterns, and folkways to the future and determine future welfare. Recently, economists have concluded that we also pass on the inflationary (or deflationary) con­ sequences of current policies. All such aspects of our economic life, and many more, are influenced by government policies. All involve choosing between present welfare and future welfare. In short, they are public investment decisions. Although the normative aspects of public investment criteria have been extensively studied, there is very little theory predicting government investment behaviour when governments are constrained by political realities. The present work investigates a simple model of public intertemporal choice where decisions are made within a political framework. The particular problem analysed is the choice between inflation and unemployment because this conflict has been very prominent in http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economic Studies Oxford University Press

The Political Business Cycle

The Review of Economic Studies , Volume 42 (2) – Apr 1, 1975

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References (2)

Publisher
Oxford University Press
Copyright
© 1975 The Society for Economic Analysis Ltd.
ISSN
0034-6527
eISSN
1467-937X
DOI
10.2307/2296528
Publisher site
See Article on Publisher Site

Abstract

Downloaded from https://academic.oup.com/restud/article-abstract/42/2/169/1580972 by guest on 14 October 2019 The Political Business Cycle 1,2 WILLIAM D. NORDHAUS Yale University There are many ways in which today's political choices affect future well-being. Future capital stocks, structures and machinery and roads, depend on the extent to which present generations invest instead of consume. Stocks of natural resources depend on past con­ servation efforts. There are perhaps more subtle ways in which we bequeath our tastes, consumption patterns, and folkways to the future and determine future welfare. Recently, economists have concluded that we also pass on the inflationary (or deflationary) con­ sequences of current policies. All such aspects of our economic life, and many more, are influenced by government policies. All involve choosing between present welfare and future welfare. In short, they are public investment decisions. Although the normative aspects of public investment criteria have been extensively studied, there is very little theory predicting government investment behaviour when governments are constrained by political realities. The present work investigates a simple model of public intertemporal choice where decisions are made within a political framework. The particular problem analysed is the choice between inflation and unemployment because this conflict has been very prominent in

Journal

The Review of Economic StudiesOxford University Press

Published: Apr 1, 1975

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