I decided to put my thoughts into a longer essay.

When Ronald Reagan defeated Carter’s re-election bid, “incomes policies” were a proven failure. Notwithstanding Milton Friedman’s comments quoted above, by 1980 it took a lot less courage to stand by a monetary approach to disinflation than it did a decade earlier. I believe that Carter would also have stuck with Volcker through the recession, and if that is the case, then the behavior of the economy in the 1980s would have been about the same regardless of who had been President.

…I believe that President Reagan made a positive difference for the economy. However, unlike most analysts, I do not focus on his tax cuts. Instead, I think that Reagan’s main contributions were on energy policy, tax reform, and resisting government expansion.

I try to make several points in the essay. One is that looking at the performance of macroeconomic variables during a President’s term of office is a poor way to judge economic policy. Related to that is my view that supply-siders engage in contortionism by choosing to “throw out” the 1981-1982 recession from Reagan’s record, even though the disinflation that came from the monetary policy of that period had great lasting benefit.

Another point that I make is that the experience of the 1970’s discredited one of the most important left-wing ideas for government intervention–the idea that “incomes policies” rather than monetary policy could be used to fight inflation. Finally, I believe that supply-siders overstate the virtues of Reagan’s tax cuts, as opposed to other policies that I think were more clearly constructive.

For Discussion. How did the experience of the 1970’s shift the consensus within the economics profession concerning macroeconomic theory and policy?