The Theory Of The Economy - amazonia.fiocruz.br

The Theory Of The Economy Video

Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession.

Navigation menu

On the theoretical side, they thought that they had resolved their internal disputes. In link, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making. During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right.

There was nothing Thee the prevailing models suggesting the possibility of the kind of collapse that happened last year.

Meanwhile, macroeconomists were Ot in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. What happened to the economics profession?

And where does it go from here? As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.

Theories Of Secularization

Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives.

Unfortunately, this romanticized and sanitized vision of the economy led Theoryy economists to ignore all the things that can go wrong. In practical terms, this will translate into more cautious policy advice — and a reduced willingness to dismantle economic safeguards in the faith that markets will solve all problems.]