What economists still need to learn

What economists still need to learn
Macroeconomists 'have failed to absorb crisis lessons'. Pic: iStock

Macroeconomists' models are still struggling – and mostly failing – to cope with disruptive change, and with the fact that both balance sheets and inequality matter

Macroeconomics was one of the casualties of the 2008 global financial crisis. Conventional macroeconomic models failed to predict the calamity or to provide a coherent explanation for it, and thus were unable to offer guidance on how to repair the damage. Despite this, much of the profession remains in denial, hankering for a return to “normal” and in effect treating the crisis as just a rude interruption.

That needs to change. Although an economic recovery has...

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