The role of the government in growing, said Stephen Cohen, author of Concrete Economics, and directing the U.S. economy is hotly debated and often overlooked. But planning the economy goes back to Alexander Hamilton's decisions as the country's first Secretary of the Treasury, Cohen said.
"It's a simple game where entrepreneurs and government come together to reshape the economy," said Cohen. "It's like tigers mating. They don't sit around and cuddle very long."
Cohen is a professor emeritus of city and regional planning at the University of California at Berkeley. He also codirects the Berkeley Roundtable on the International Economy. His previous books include The End of Influence with J. Bradford DeLong.
Cohen said that Hamilton used tariffs to protect the fledgling nation's fragile economy in a deliberate and "concrete" manner. He said presidents Lincoln, FDR and Eisenhower similarly took the lead in opening new economic spaces.
Cohen said the idea that the economy has always been left to the free market is historically inaccurate.
He said the "financialization" of the economy that started in the 1980s as a result of deregulation went too far, thus leading to the financial crisis of 2008.
"We grew the financial sector by over a pentagon, which is a pretty good size," said Cohen. "But how big should it be?"
Cohen said the financial sector has grown to more than 20% of the economy. He said one could argue that there is no value left to add in areas like insurance, brokerage and real estate. Cohen added that the financial sector was half that size in the 1950s, when the country was seeing massive growth under President Eisenhower.
"I propose that America start talking about what shape we want to give this economy," said Cohen. "We talk ideology and economic theory now and that makes no sense at all."