Friday, January 30, 2009

Have we learned 101 Economics?

William Easterly says “I think we economists love to speculate about heterodox theories when times are good and we feel free to discuss experimental alternatives to economic orthodoxy (and nobody is paying us much attention during good times anyway). But when the global economy is in free fall and everyone else seems ready to throw each and every Econ 101 principle out the window, we get desperate to save the core principles that lead to prosperity and development.

This is what the Principles textbooks teach us. These ideas made their way into Principles textbooks by some process of natural selection--they were the ideas that stood the test of time in economics, because they were associated with the steady climb toward prosperity of the rich countries and, in the last half century, of the global economy.

There are variations around these core ideas of course, but the variations are always grounded in a home of sensible economics 101. In the midst of the scariest crises of our lifetimes, economists are coming home”.

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