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Since the war the Budget has often been used to regulate aggregate demand and to stabilise prices, as Keynesian theory maintained, but can fiscal policy solve the problem of economic instability? T...he programme uses budget speeches, trade cycle figures and interviews with economic experts and academics to argue the case that fine-tuning does not keep national income at equilibrium level. This is because of time lags and uncertainty about consumers' behaviour. But some speakers do believe that fiscal policy does have some effect.
Metadata describing this Open University video programme
Module code and title: D284, National income and economic policy
Item code: D284; 03
First transmission date: 16-05-1979
Published: 1979
Rights Statement:
Restrictions on use:
Duration: 00:24:35
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Producer: Nigel Houghton
Contributors: Derick Heathcoat Amery; Patrick Minford; David Worswick; Rosalind Levacic; Christopher Dow; Kenneth Harris
Publisher: BBC Open University
Keyword(s): Fiscal policy; Keynesianism; Macro economics
Footage description: The programme begins with archive film of Derrick Heathcote Amory, chancellor 1960, talking about his budget. Rosalind Levacic describes how Amory was following orthodox Keynesian policies of using fiscal policies to regulate aggregate demand. She talks about the pattern of trade cycles and theories which explain them. Government policies have sought to counter fluctuations using fiscal policy. Rosalind Levacic explains how this could be achieved, with fiscal measure designed to counterbalance variations in economic activity. David Worswick, Director of the National Institute for Economic and Social Research, argues that the main aim of governments throughout the 1950s was to avoid unemployment; however balance of payments problems made this difficult. Archive film of Heathcote Amory discussing his budget. David Worswick states that the economy in the 1950's was successful. The stabilisation policy of the government increased confidence that a recession could be avoided. Christopher Dow states that at one time he believed that fiscal policy was destabilising the economy. He has now changed his opinion. Patrick Minford argues that fiscal policy had little effect over the post-war period. He places more stress on the importance of world trade during that period. Rosalind Levacic argues that whatever view is taken of the importance of fiscal policy, it is difficult to implement it successfully. Archive film of Heathcote Amory admitting that he underestimated the government's revenue for 1959. Christopher Dow discusses the processes involved when planning fiscal strategy. Patrick Minford highlights the problems which hinder the implementation of fiscal policy, such as lags in the economy. Rosalind Levacic explains the consequences of these lags and demonstrates how the cycle of income with policy may fluctuate more than the cycle of income without policy. Christopher Dow describes the disillusionment with fiscal policy which has developed over recent years. Patrick Minford and Rosalind Levacic argue that in order to be able to predict the effect of tax changes we have to study the marginal propensity to consume. It may be long-run expected income that determines the level of consumption therefore fiscal policy only affects consumers spending if they believe tax changes to be permanent. Patrick Minford states that although in some cases fiscal policy may have an impact on demand, in most cases it leads into inflation and inflationary expectations. The main failing of the Keynesian approach today is that it ignores certain kinds of expectations. David Worswick argues that the Keynesian approach to managing the economy is still tenable but that the context has changed. Britain now exists in a much freer international system of trade. This makes managing the economy much more complicated than it was before.
Master spool number: 6HT/72861
Production number: 00525_2426
Videofinder number: 154
Available to public: no