Alfred Marshall on Nineteenth-Century English Economics and Economists
Adam Smith on How to Make the Working Class Happier and More Productive: Pay Them More

Afternoon Must-Read: Paul Krugman: The Fall of Macroeconomics

Paul Krugman: Stagflation and the Fall of Macroeconomics: "Anti-Keynesian views...

...indeed real business cycle theory asserting that inadequate demand can never be a problem, retains a firm grip on much of the profession.... More broadly, the fundamental shift in intellectual criteria that Simon [Wren-Lewis] has written about several times--from 'does the model fit the facts?' to 'does it have rigorous foundations in [intertemporal] maximization?'--remains very much in force. You might have expected both the 2008 crisis and the years of poor performance that followed--years in which new classical types made massively wrong predictions, while people who remembered IS-LM did much better--would have changed this a lot. But remember that new classical macro fundamentally elevated microfoundations above empirical success; so orthodoxy largely brushed aside empirical failure.... In the long run, new classical macro may erode in the face of its uselessness. But in the long run — well, you know...

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