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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