Macroeconomic Policies and Institutions

Why since at least two decades macroeconomic policies have been so active in the US and so passive in Europe? I contend that social norms have changed and that the new norms call for a greater degree of inequality. Then macroeconomic policies have to be active in the United States and passive in Europe. The change in the social norm was mainly led by the new generation of elites born after WW2 educated in a context where individual successes were more affected to individuals than to the collective action which has contributed to build the public goods they have benefited from. 1.- Prolegomena: The European Macroeconomic Policy Puzzle The theme of this lecture came out as an effort to understand the difference in economic policy strategies on both sides of the Atlantic. Why since at least two decades macroeconomic policies have been so active in the US and so passive in Europe? Why governments in Europe do accept rather passively a persistent high level of unemployment? What explains their apparent resignation to a slow growth trend? Is there a fundamental difference in institutions that can explain such a prolonged difference in growth performance? My answer to these questions has varied through time. In the 1980s I developed with Edmund Phelps (Fitoussi and Phelps, 1988) an explanation of the slump in Europe. The radical change of the US policy mix in the first half of the eighties led to a large increase in both the world long term interest rate and the