ABSTRACT
INTRODUCTION Economic policy leads to a great deal of controversy between economists. Disagreements arise about the aims of public policy, the importance or ‘weights’ to be attached to various aims, the relevance of alternative theories in explaining the causes of policy problems and the appropriateness and desirability of particular policy solutions.1 The problems which confronted the British economy in the 1970s illustrate some of these controversies. In this period, unemployment and inflation were major issues but politicians and others differed in the emphasis which they were willing to place on each of these. Some emphasised, or valued highly, the maintenance of full employment whilst others preferred more price stability. Disputes also arose over the precise causes of the inflation and the nature of unemployment in this period: an area where economic theory and the evidence on the predictive accuracy of alternative theories is relevant. For example, is inflation always a monetary phenomenon or do trade unions matter? Disagreements appeared over the choice of policy solutions, especially the appropriateness and desirability of deflation and incomes policies. Worries were expressed about conflicts in policy objectives such as the likely effects on inflation and the balance of payments of policies aimed at maintaining full employment. But policy debates were not confined to macro-economics. Micro-economic policy, embracing product and factor markets, was also controversial.
