Tuesday, July 3, 2012
Economic textbook theory under fire
There's quite a lot in this article but the gist is that it's getting hard to ignore the gulf between economic theory as taught and the real world. Perhaps someday we'll realise that blowing property bubbles isn't so clever. 'Roger Farmer, a professor of economics at the University of California in Los Angeles, was at a dinner at the Bank of England to celebrate the "Great Moderation", a term coined to describe an era in which some politicians claimed monetary policy had ended boom and bust. "We had entered a new era of economic prosperity," he recalled in a paper this February. That night, British building society Northern Rock went under, heralding the start of Europe's crisis and a global backlash against economists.'