Dollars and Jens
Friday, September 04, 2009
the state of macroeconomics
Krugman recently had a longish piece on the state of macroeconomic theory; it's full of caricature about both macroeconomics and the efficient market hypothesis, neither of which is Krugman's field. (I found myself wondering, again, "Why do so many otherwise intelligent people misunderstand how the EMH is wrong?") Scott Sumner (a proponent, I believe, of the EMH) responds; I tend to differ from Sumner both in the credit I give efficient financial markets and in the power I believe monetary policy has (he has implied that appropriate monetary policy can cure all economic ills, though he hints to the contrary in
Arnold Kling argued that the crisis reflected a real problem with the economy, the need to reallocate labor and other resources. I do think there was a real problem in late 2007,), so I don't really think he quite nails the problems with Krugman's piece, but he's at least in more or less the right field, and I'm not inclined to flesh out my own complaints right now.