Friday, September 4, 2009

Economists got it all wrong?

In this well-crafted but controversial essay, Paul Krugman reviewed the field of macroeconomics and financial economics in retrospect: from the neoclassical view of the market economy to the Great Depression and heydays of Keynesianism; from the rise of monetarists and the rebirth of the free-market economics to the debate between the freshwater and the saltwater school; from the heydays of EMH, rational expectation and RBC to the upsurging movement of behavioral finance and "frictions" macro.

On the policy side, he also pointed out, that conceited economists and policy makers often got the problems so wrong that the current state of the dominant views has to change. Perhaps we need to re-embrace Keynes as the pendulum continues to swing.

via Mankiw. Here is some alternative view.

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