A Third Way on Fiscal Policy

Courtesy of INET, here is Pavlina Tcherneva explaining her “bottom up” approach to fiscal policy.

Notice the way she uses the term “trickle down” to apply also to conventional pump-priming fiscal policy (targeting growth and hoping for the right employment side-effects).  We need to move beyond the conventional options on fiscal policy, says Tcherneva; beyond a fiscal policy space marked out by aggregate demand management on one end and austerity on the other.  There’s a third approach that’s more in tune with the “original Keynesian spirit,” as she puts it:  directly employing the unemployed.  We should be targeting employment and the unemployed directly rather than trying to achieve this through the kind of bank-shot maneuver represented by conventional pump priming.

You can read some of Tcherneva’s work on this issue here and here.  One-pager here.