6 Conclusion Where to draw the line between laissez-faire and planning?
Historians of economic analysis frequently like to remind that “continued relevance is a fundamental rationale for history of economic thought” (Hoover 1995, p. 677). We hasten to add that this does not mean ventriloquism. In the present case, our purpose is not to wonder what Keynes and Friedman would have diagnosed as the root causes of the current recession or what they would have called for today. Rather, it seems to us that a return to their texts should help us to pursue avenues of reflection at both the theoretical and the policy level, and in particular to better frame the issues of the debate currently at stake. Both Keynes and Friedman should help us to reshape our questionings regarding the relationships between public institutions and private agents; they should also help us to rethink the policy alternatives at our disposal. Here below, we provide our results under three main headings. Under the first heading there is Keynes’ and Friedman’s invitation to reflect upon the critical link between expectations and policy guidelines. Our two authors have complementary lessons to teach us with regard to our contemporary treatment of expectations as rationally formed. On the one hand, Keynes is highly concerned with the way State authorities could be in capacity to guide long-term real expectations in a world of uncertainty. On the other, Friedman asks us to remember that private agents do really take time to adjust even their short-term nominal expectations (which are better seen as adaptive) so that the anchoring of inflationary expectations should be an imperative matter of concern for policy- makers. Second, it seems to us that Keynes and Friedman could help us to reframe the terms of the debates surrounding the right economic policy for a decentralised market economy. Both of them invite us to go beyond the ‘rules versus discretion’ alternative as it is set today and to go even beyond the ‘fine-tuning versus anti-cyclical devices’ we used to refer to until the 1970s. In our view, a highly relevant way of putting the issue is the alternative set by Simons in the 1930s between ‘authorities’ and ‘rules’. Stated this way, Keynes and Friedman offer us great lessons. On the one hand, Keynes’ stance for ‘authorities’ means that the State is the very agent able to cope with uncertainty in a monetary economy and to help us to escape harmful conventional judgement, which is at the opposite end of what is nowadays called ‘discretion’. On the other hand, Friedman’s
