But the political leadership, and eventually the younger economists who started at the Ministry, had other plans.5 The economy was to be managed. Keynes’ idea that the budget should be used actively to manage demand and output over an economic cycle was to them an obvious truth. In a Kuhnian sense, the older civil servants had to go for the new thinking to gain ground. The legal experts at the Ministry had to give way to the young economists. The new regulatory regime was enthusiastically implemented after the war, and crowned with success. The contrast between the blight of the interwar years and the postwar boom was stunning. The ambition was not only to keep unemployment low. Which industry sectors should be allowed to invest? What type of dwellings should we build? Who should be able to buy a car and have a telephone installed? In the 1950s and 1960s, these were questions in respect of which the central government had firm views. Keynes, regulation and planning were predominant truths in the former government building for several decades. Yet neither did these truths remain eternal. In the 1970s, deficits ballooned when the government used countercyclical policies to “build a bridge” over the global downturn. But it was a bridge to nowhere. Inflation took off and government finances were strained to breaking point. The policy of micro-managing the economy had gone too far. Wage and price controls at the end of the 1970s, the last gasp of the postwar paradigm, did little to help.
While simple rules produce answers quickly, these answers may not be a proper response to the question we want to know the answer to. An analogy to this is substituting the fundamental question, “Am I driving safely?” with “Am I obeying the speed limit?”  20  Most countries have balanced budgets as a long-term strategy. However, the long-term intention of a balanced budget is often abandoned in practice. This is another example of the time inconsistency problem. Today, many European countries are forced to pursue fiscal austerity, even if their current economic situation makes such a policy undesirable. The most rational option would be if governments were able to approve credible tightening measures that cut spending and raised taxes in the medium term, but that had negligible short-term austerity effects. Pension reform would be such a measure. The problem is that investors, who will be lending money to governments in the meantime, have little confidence that governments will actually follow through on their plans. History shows that they have good reason for this lack of confidence. Thus, the OECD and the IMF are recommending measures intended to deal with the time inconsistency problem and bolster confidence that long-term plans will actually be implemented. Independent fiscal policy boards that monitor government budgetary policy and that speak up if plans are not followed is one such measure. These boards will also make recommendations for realistic economic forecasting, so that projections of future tax revenues are credible.