Economics in the mirror of the financial crisis
AbstractThe structure of the Chapter is as follows. In Section 2 I discuss some of the factors that may have played a role in causing the crisis and emphasise that supporters of different economic theories will assign different weights to each factor in their analyses. As a consequence, suggested economic policies are highly sensitive to the economic theory employed in evaluating the set of causes. In Section 3 I seek to defend economists from the common charge that their inability to foresee the crisis is a clear sign of the lack of scientific status of their discipline. In my view, the main liability of mainstream economics lies elsewhere, in its excessive trust on the self-equilibrating mechanisms of free-market economies. Mainstream macroeconomists, enamoured of the efficient financial markets hypothesis, may have been too hasty in dismissing the financial instability hypothesis proposed by Keynes and developed by Minsky. Section 4 briefly outlines Keynes’s and Minsky’s contribution on this subject while Section 5 concludes.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39470.
Date of creation: 2010
Date of revision:
global financial crisis; symmetry thesis; John Maynard Keynes; Hyman Minsky;
Find related papers by JEL classification:
- F30 - International Economics - - International Finance - - - General
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
- A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
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