This is the third article in a three-part series on the self-destruction of neoclassical economic theory. See part one here and part two here.
To say that the long self-destruction of the academic economic tradition was given a final push towards the cliff by the global financial crisis paints a pretty bleak picture of the future of the dismal science. But I can also see some rays of sunshine.
Floyd Norris, the chief financial correspondent of the New York Times, has written an article entitled “The Time Bernanke Got It Wrong” on Bernanke’s support of “policies that allowed the dangerous imbalances to grow and bring on the crisis” in which he cites Hyman Minsky and my work modelling Minsky’s Financial Instability Hypothesis.
This is the second article in a three-part series on the self-destruction of neoclassical economic theory. See part one here.
As the neoclassical economics tradition gradually gave up its central position in universities over the last forty years, it remained triumphant in the real world. But the global financial crisis brought a sudden, shocking end to this exhuberism.
Forty years ago, any student who enrolled in an undergraduate degree at the Faculty of Economics at Sydney University in 1971 had to complete four year-long courses in economics, out of a total of ten such courses: Microeconomics and Quantitative Methods in the first year, Macroeconomics in the second, and International Economics in the third.
INET has just released an interview with my reseach colleague and now good friend Professor Matheus Grasselli, the Deputy Director of the Fields Institute, one of the world’s leading institutes for applied mathematical research. He presents a leading mathematician’s perspective on mathematics as used and abused in economics, and what promise there is for a better economics in future, based on more modern mathematics than is used in Neoclassical DSGE models. A highly recommended video:
This is the keynote speech that I gave to the Australian Teaching Economics Conference, the paper for which will be the subject of my next two posts: the decline of Economics from up to 40% of any business degree to about 4% today. In it I suggest that heterodox economists should complete the march to zero by jumping ship and joining Accounting departments. There they could develop a “Monetary Economics for Accountants” unit that would replace the standard Introductory Economics subject required for accreditation as an accountant.
One of the handful of journalists to fully grasp the enormity of the economic crisis that was to commence in late 2007 has died, long before the crisis itself will end. In his column Planet Wall Street, David Hirst’s poetic prose warned his readers of the coming economic tsunami, at the same time as the officials who should have prevented it continued to laud the very instruments of financial deceit that made it possible.
Paul Krugman recently posted on predictions of the crisis before it happened, in a piece entitled “Non-prophet Economics”. It had a set of propositions about how one should evaluate such claims with which I completely and utterly agree. I’ll quote it in its entirety, because it’s an eminently suitable starting point for evaluating whether a prediction was in fact made:
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