It is important to understand how the US government has repeatedly and intelligently redesigned the economy in the past, because the market does not undergo an intelligent redesign by itself, according to Stephen Cohen and Bradford DeLong in their book Concrete Economics: The Hamilton Approach to Economic Growth and Policy. There are things that matter immensely for an economy that only government can do. If it hesitates, refuses, or botches the job, the problem does not just go away and the economy does not advance as it should.
The authors’ theory of economics differs significantly from the current accepted wisdom in which big government, big taxes and big tariffs are bad, and almost any interference by the government with the invisible hand of the market has negative economic consequences. The authors, by way of contrast, argue persuasively that the US reached its position of economic ascendancy as a result numerous market-distorting interventions of the US government, including protectionism, infrastructure development and investment in research, and that Asian countries which have enjoyed recent economic success have used a similar mix of market-distorting interventions.
The book is likely to meet passionate opposition from the true believers in small government, free trade agreements, and the absolute authority of the invisible hand. Nevertheless, as the authors argue, future economic policy should be based on practical results and evidence, rather than ideology. If the authors are correct in their analysis of economic history, there is an urgent need for substantial changes in governmental economic policies.