How Economists Got It Wrong: A Nuanced Account
AbstractThis paper considers how economists failed society by not preparing society to expect and plan for a possible financial crisis. It argues that the story told by Paul Krugman in his recent NYT Magazine article was too black and white in that it made it look as if Classical economists who were blinded by the beauty of mathematics, are to blame and that Keynesian economics is the path of the future. This paper takes issue with both those claims. It reviews the evolution of economic thinking from Classical to modern times, and shows the Keynesian/Classical terminology misses many of the nuances of policy discussions. It suggests that the solution for the macroeconomics profession isn’t the solution that Krugman suggests it is—to re-embrace Keynes. The solution is to re-embrace the broader Classical economic tradition, and to recognize that Keynes was an important part of that Classical tradition.
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Bibliographic InfoPaper provided by Middlebury College, Department of Economics in its series Middlebury College Working Paper Series with number 0909.
Length: 24 pages
Date of creation: Sep 2009
Date of revision:
Contact details of provider:
Keynes; Classical; Krugman; macroeconomics; crisis; depression;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-EVO-2009-10-24 (Evolutionary Economics)
- NEP-HPE-2009-10-24 (History & Philosophy of Economics)
- NEP-PKE-2009-10-24 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- David Colander, 2002.
"The Death of Neoclassical Economics,"
Middlebury College Working Paper Series
0237, Middlebury College, Department of Economics.
- Keynes, John Neville, 1890. "The Scope and Method of Political Economy," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 4, number keynes1890.
- Giancarlo Bertocco, 2011. "Housing bubble and economic theory: is mainstream theory able to explain the crisis?," Economics and Quantitative Methods qf1116, Department of Economics, University of Insubria.
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