Wednesday, October 3, 2012

The problematic birth of macroeconomics

This is based on a comment I made here.

From reading David Glasner's Uneasy Money blog, I have developed a general thesis about macroeconomics.

(1) Modern macroeconomics was kicked off in the reaction to the 1930s Depression.

(2) The 1930s Depression was a seriously abnormal event.

(3) Being framed by a seriously abnormal event, and by two charismatic economists (Hayek and Keynes) who were both significantly wrong about said event, set macroeconomics off on a deeply flawed course.

(4) How flawed is shown by economists failing around when confronted with another deeply abnormal event 80 years later.

The WSJ Op.Ed. pages are a particularly egregious example of (4). A sort of bad monetary economics thinking grease trap.

This could be called "the Glasner-Sumner thesis", since I came to it by reading David Glasner's Uneasy Money blog and writings by its author having already absorbed from Scott Sumner that the economics profession had largely gone off the rails in its response to the Great Recession.

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