Bryan Caplan is puzzled by the polarization of policy instrument preferences both of pro- and of anti-market economists. Excerpt:
“Austrians and hard-core libertarians usually jointly dismiss monetary and fiscal policy. But among more moderate economists, there's a long-standing tendency for pro-market views to correlate with a preference for monetary over fiscal policy. Friedman and Samuelson are the classic examples: Friedman combined highly pro-market views with a strong belief in the macroeconomic power of monetary policy and impotence of fiscal policy, while Samuelson combined rather anti-market views with a strong belief in the macroeconomic power of fiscal policy and far less confidence in the power of monetary policy. The generations of economists that Friedman and Samuelson taught usually bought the same intellectual bundles.
Question: Is there any good explanation for the pro-market/monetarist and anti-market/fiscalist correlation? Or is the right story mere happenstance and path dependence?” (Econolog, November 21, 2010).
That being said, I completely agree that “when anti-market economists see a downturn and demand more government spending, pro-market economists could insist that tax cuts are just as good a solution, if not better”. That is indeed what I advocated earlier in this blog as the best policy in the current great recession: cut taxes and simultaneously cut some spending in order not to increase deficits too much, but do not give priority to cutting deficits (and especially not by increasing taxes in a recession). And at the same time adopt an expansive monetary policy in order to avoid over valuation of the currency and in order to stimulate exports in our typically quite open economies. It is a pro-market-neo-keynesian-old-monetarist policy.