- Does the occurrence of the Great Recession indicate a failure of macroeconomics as a discipline?
The dominant school of macro thought in 1930 was Classical Economics (aka “Neoclassical” in the History of Thought field). The Great Depression resulted in the failure of Classical Economics to be taken seriously in the discipline of economics. This failure was defined by classical economics’ inability to either:
- Explain the cause of the Great Depression, or
- Provide a policy prescription to get the economy out of the Depression.
The result was an evolution in macroeconomic thought which continues to this day, as shown by the following schools of thought:
- Keynesian Economics,
- Supply Side economics,
- Austrian economics,
- New Classical, and
- New Keynesian Economics.
Beginning in 2009, after the onset of the Great Recession, a number of prominent commentators began to assert that the Great Recession indicated a failure of macroeconomics as a discipline, similar to what happened to Classical Economics as a result of the Great Depression. As we study macro thought since 1930, we will investigate this assertion and draw conclusions which we will publish on this website.
To get started, please read the following articles before our first class:
- How Did Economists Get It So Wrong? – NYTimes.com by Paul Krugman
- Economics: What went wrong with economics | The Economist http://www.economist.com/node/14031376?story_id=14031376&source=hptextfeature
As you read these, please note
- Anything you don’t understand / or any questions you have about the authors’ arguments.
- Anything you disagree with.
Feel free to post your responses to these questions as comments on this post.