Trust economic textbooks? Not on your life!

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Recently Krug­man has been defend­ing text­book eco­nom­ics, argu­ing that if pol­icy mak­ers had sim­ply fol­lowed their advice, the cri­sis would have been far less severe.

It is deeply unfair to blame text­book eco­nom­ics either for the cri­sis or for the poor response to the cri­sis.  (Krug­man, The Trou­ble with Eco­nom­ics is Econ­o­mists)

End this Depression Never?

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Larry Sum­mers’ speech at the IMF has pro­voked a flurry of responses from New Key­ne­sian econ­o­mists that imply that Sum­mers has located the “Holy Grail of Macro­eco­nom­ics” – and that it was a poi­soned chalice.

Sec­u­lar stag­na­tion”, Sum­mers sug­gested, was the real expla­na­tion for the con­tin­u­ing slump, and it had been with us for long before this cri­sis began. Its vis­i­bil­ity was obscured by the sub­prime bub­ble, but once that burst, it was evident.