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Tuesday, March 22, 2011

Reviving Macroeconomics

I hope Prof. Stiglitz is correct that there can be some serious movement on reform (or reviving as I prefer).  But, to write the entire article and not mention or give credit to the heterodox post-Keynesian economists who have for years had these credit models at the ready (and were largely ignored), is inexcusable.

I am skeptical that reform can occur from the inside (mainstream).  The 2 main reasons why economics isn't economics anymore:  one, the early economic thinkers (Smith, Hume, Marx etc) weren't tied to the God of mathematics.  Mainstream economists treat math, and all of its boundaries, like a crack addiction.   More importantly, economics isn't economics anymore - much of it appears to be politics - colored with an economics pen.  The major economists that the average person or politician listens to are really political themselves (Krugman, Mankiw etc....all have a political philosophy).  It's easy to create a few assumptions (since that's the problem of being tied to math) which of course give you the answer that makes your inner politician smile.  So the classical 'economists' assume some things about rationality etc. and wow - lo and behold if we leave the market alone, it works.  Keynesian economists make some assumptions about markets breaking and lo and behold, we need government.  I am not delusional  - economics doesn't create ones politics, politics creates ones economics - unfortunately all too often.