Comparative economics is not the same as international economics. In fact, the word evokes the phrase systems, until recently a dull chapter dutifully included at the end of almost every Principles book. The collapse of communism has left a single system, the mixed economy of capitalism-cum-government in all of the infinite variety of possible combinations. Since the world has converged on this single system, one can snatch the adjective from its old mate systems and attach it to a whole new concept of how economics can and should be taught, that is, comparative economics.

This paper introduces a new approach to the empirical testing of the Lucas-Sargent-Wallace (LSW) "policy ineffectiveness proposition," which compares the LSW hypothesis with an alternative that states that prices respond fully in the long run, but only gradually in the short run, to nominal aggregate demand disturbances. The empirical equations, estimated for a new set of quarterly data extending back to 1890, exhibit uniformly high responses of real output and low responses of price changes to anticipated changes in nominal GNP. The paper compares and tests three alternative methods of introducing "persistence effects" into the LSW framework.