The Crisis in Economic Theory
AbstractThis paper discusses modern macroeconomic and financial models in the light of the current crisis. Theory has been revealed to be inadequate in its explanation of the origins and the nature of the crisis, as Jean-Claude Trichet the Governor of the European Central bank and his colleagues at other central banks have indicated. Basic macroeconomic models, however sophisticated have continued to be based on the same foundations shown to be wanting in the 1970s and financial market models have continued to use the «efficient markets hypothesis» despite warnings by numerous mathematicians and economists since 1900 as to its unsound foundations. We need to construct models which may not be able to predict the timing of the onset of a crisis but will encompass the possibility of one. The most promising candidates for such models are those which view the economy as a complex adaptive system, may use some of the tools of statistical physics and do not necessarily use the standard equilibrium approach.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Società editrice il Mulino in its journal Rivista italiana degli economisti.
Volume (Year): (2011)
Issue (Month): 1 ()
Contact details of provider:
crisis; general equilibrium; forecasting; networks; complex system; B22; D84; D85; E10; E44.;
Find related papers by JEL classification:
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.