Afternoon Must-Read: Joe Stiglitz: Reconstructing Macroeconomic Theory to Manage Economic Policy
Joe Stiglitz: Reconstructing Macroeconomic Theory to Manage Economic Policy: Any theory of deep downturns has to answer these questions...
What is the source of the disturbances? Why do seemingly small shocks have such large effects? Why do deep downturns last so long? Why is there such persistence, when we have the same human, physical, and natural resources today as we had before the crisis?... The apparent liquidity trap today is markedly different from that envisioned by Keynes in the Great Depression, and why the Zero Lower Bound is not the central impediment to the effectiveness of monetary policy in restoring the economy to full employment.
