affected. Through a ripple effect, other sectors may become adversely
affected as well. Two fundamental questions arise: (1) Should the
government do anything to counteract this adverse shock? And if so, (2)
What should it do?
The first question is controversial. The pre-requisites for good
macroeconomic policy are timely and reliable data, well-constructed
analytical frameworks, and professional policy-makers. Given these
conditions, some economists who believe in "policy activism" support
government stabilization policies. For example, the coffee shock could lead
to a recession that wastes economic resources, causes hardships for the
unemployed and the poor. Therefore, government should intervene to
insulate the rest of the economy from the shock.
Other economists prefer a passive policy stance. Their argument is that
market economies are inherently stable. Therefore, in response to shocks,
the "self-correcting" mechanisms of the market (e.g., wage and price
flexibility) will eventually restore full employment, without a need for
government intervention. Further, macroeconomic policy designed to
stabilize the economy may in fact turn out to be de-stabilizing. The various
lags involved in policy formulation and implementation mean that by the
time a policy takes effect, the economy may not need it any more.
One area in which both groups of economists seem to agree is that the
government should provide the market with proper institutions and
mechanisms apt to enable, regulate, and oversee market activities in an
efficient and predictable way.
We will address the second question in the next two articles.
39. CAN THIỆP HAY KHÔNG CAN THIỆP?
