How Economists Got It Wrong: A Nuanced Account
This 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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References listed on IDEAS
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- Mantel, Rolf R., 1974. "On the characterization of aggregate excess demand," Journal of Economic Theory, Elsevier, vol. 7(3), pages 348-353, March.
- Jacob Viner, 1936. "Mr. Keynes on the Causes of Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 51(1), pages 147-167.
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- 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.
- Sonnenschein, Hugo, 1972. "Market Excess Demand Functions," Econometrica, Econometric Society, vol. 40(3), pages 549-563, May.
- V. Tambovtsev., 2009. "Financial Crisis and Economics," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
- Colander, David, 1984. "Was Keynes a Keynesian or a Lernerian?," Journal of Economic Literature, American Economic Association, vol. 22(4), pages 1572-1575, December. Full references (including those not matched with items on IDEAS)
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