Day By Day

Saturday, July 18, 2009

The Crisis in Economics Theory

When Joe Biden famously remarked that "everyone got it wrong" in evaluating the nature of and appropriate response to the recent financial crisis, his statement might have been politically problematic but it was intellectually honest. Recent events have cast doubt on or discredited many of the tenets of modern macroeconomic and financial economic theory. The Economist magazine is taking a look at what has happened and its implications for a discipline in crisis.

The first installment, an overview of the problem, is here.

Then read this on macroeconomics.

And this on financial economics.

It is a sobering assessment and a reminder that those experts who confidently assured us all that they knew just how things worked and how to manage them, didn't.