PRINCETON – For the last century, economic-policy debate has been locked in orbit around the respective roles and virtues of the state and the market. Does the market control the state, in the sense that it sets a limit on governments’ ability to borrow? Or does the state take charge when the market fails to perform socially necessary functions – such as fighting wars or maintaining full employment?
This old debate is at the core of today’s profound divisions over how Europe should respond to its debt crisis. The same question is dividing American politics in the lead-up to November’s presidential and congressional elections.