Thursday July 16, 2020

What economists still need to learn

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

10th September, 2019
Macroeconomists 'have failed to absorb crisis lessons'. Pic: iStock

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...

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