Post-crisis NCM Theory Adaptations: Evolutionary, Revolutionary or Cosmetic?

The global crisis virtually put the mainstream New Consensus Macroeconomics (NCM) in the dock, as in the popular mind the crisis was mainly associated with the pre-crisis macropolicy framework, whose architecture was largely based on the recommendations emanating from academics and policymakers strongly committed to the NCM theology. It was widely expected that just as the Great Depression of the 1930s sounded the death knell for the Marshall–Pigou paradigm of neoclassical economics, the GFC would do something similar for the NCM. This chapter shows that this expectation has been belied, though some changes to the NCM have indeed occurred—a few on the theoretical front but more on the policy front. This entire process of mainstream persistence with a few adaptations, is best understood in a Lakatosian framework. To do this, in this chapter we take stock of how the mainstream profession reacted to the GFC—in particular what explanations were offered for its occurrence and how the major criticisms against the orthodoxy were countered.