I just finished reading a very good article in The New York Times Magazine by Paul Krugman, an economics professor at Princeton University and the recipient of the Nobel Prize in Economics in 2008. It’s pretty long, but I think it’s well worth it. In it, Krugman discusses the questions of how economists got it so wrong, of how they failed to predict the current recession, of how contemporary macroeconomics has been so illusioned. He points to the prevailing economic belief (among both freshwater and saltwater economists) in an “idealized vision of an economy in which rational individuals interact in perfect markets,” that is, the Chicago school of economics that embraces the efficient market hypothesis. Krugman contends that people do sometimes act irrationally and that markets are not always efficient or perfect—ideas that I myself have come to accept despite the SCSU academe that tends to dismiss such notions. What he propose as a solution to the current problem in macroeconomics is a reversion to Keynesian economics and a heavier reliance on behavioral economics. I can certainly agree with him on many of his points, but I doubt I can do the article justice here so I advise people read it on their own.

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