Dani Rodrik writes:
- So is economics in need of a major shake-up? Should we burn our existing textbooks and rewrite them from scratch?
- Actually, no. Without recourse to the economist’s toolkit, we cannot even begin to make sense of the current crisis.
- Why, for example, did
China’s decision to accumulate foreign reserves result in a mortgage lender in taking excessive risks? If your answer does not use elements from behavioural economics, agency theory, information economics, and international economics, among others, it is likely to remain seriously incomplete. Ohio
- The fault lies not with economics, but with economists. The problem is that economists (and those who listen to them) became over-confident in their preferred models of the moment: markets are efficient, financial innovation transfers risk to those best able to bear it, self-regulation works best, and government intervention is ineffective and harmful.
- Economics’ richness has not been reflected in public debate because economists have taken far too much license.
- When economists disagree, the world gets exposed to legitimate differences of views on how the economy operates. It is when they agree too much that the public should beware.
- Sadly, in view of today’s needs, macroeconomists have made little progress on policy since John Maynard Keynes explained how economies could get stuck in unemployment due to deficient aggregate demand. Some, like Brad DeLong and Paul Krugman, would say that the field has actually regressed.
It is not surprise to me when Mr Dani did not mentioned economists like F A Hayek, Mises who actually explained about how “John Maynard Keynes explained how economies” functions “in unemployment due to deficient aggregate demand.”
Neverthless, some the above questions are relavent ot ponder.