In this working paper, James K. Galbraith rejects the analytical construct within which many economistscurrently operate—that is, the construct in which, in the extreme, macroeconomic behavior is identical to thebehavior reflected in microeconomic demand and supply curves. He rejects it on the theoretical and practicalgrounds that microeconomic categories (supply, demand, price, and quantities) "have little bearing on importantpolicy questions." The markets that have a bearing on policy either are asset markets (for which the rules aredramatically different from those for flow markets) or are not really markets at all, but rather a set of deeplystructural social relations. According to such thinking, microeconomic issues become secondary in the policyarena and macroeconomic policy tools—spending, taxes, income policies, and interest rates—take the fore.


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