Economic Crisis Compels Economists To Reach For New Paradigm

Wall Street Journal:

The pain of the financial crisis has economists striving to understand precisely why it happened and how to prevent a repeat. For that task, John Geanakoplos of Yale University takes inspiration from Shakespeare's "Merchant of Venice."

Read the whole story: Wall Street Journal

Comments

[need more jobs]

All this economic recovery talk in BS. Something democrats & republicans can agree on.

good articles; http://financeopinionss.blogspot.com

[hu.man]

I think the economics discipline is in dire need of some new type of thinking that takes into account the emerging globalism in recent decades. Within the purview of this new paradigm, the concept of inflation which is central to understanding and practice of economics has taken on a whole new meaning that is infinitely more complex than the traditional understanding which centers around Consumer Price Index (CPI).

This is particularly important now because the economists believe that there is a buildup of inflationary pressure emerging down the road that is the outgrowth of Fed's quantitative easing. This type of expectation that is being pushed forward by economists and followed by those who make crucial investment and economic decisions is counterproductive to the recovery efforts. Clearly, economists fail to understand that the excess global capacity that exists as a result of massive global downturn is absorbing the "wall of liquidity" produced by Fed.

The antiquated thinking that you can't create prosperity by printing money is not applicable to the post-industrial 21st century. There is an insatiable appetite for liquidity on a global scale and there is really no viable method currently to satiate it other than the enormous U.S. budget deficits.

The U.S. treasury bond yields are historical lows even though the projected budget deficits are at historical highs. That is an oxymoron unless you truly understand the scale and scope of how much liquidity is out there looking for some place to land.

[blueskybigstar]

Stop calling it a science. Most of these "economists" have lost all common sense.

[yappnmutt]

the eurozone economic system is the best system. the middle class is insulated from business cycles by .gov(business) and the peoples' saving habits. the eurozone middle class is not nearly as harmed as the usa middle class.

in the usa, the middle class suffers the brunt of the downturn and pays for the recovery through .gov. add to that the spendthrift nature of the average american and you have an implosion of the middle class.

[itolduso]

it's simple, really...... start enforcing the laws against usury & fraud , eliminate off-shore tax havens, reduce the tax on 'homesteads' and multiply by 4 times the tax on 2nd + homes

[desertman]

When Warren Harding took office in ‘21 the Panic of 1920 was taking the unemployment rate from 4% to nearly 12%. GDP fell 17%. Then as now the president’s subordinates urged him to intervene. Secretary of Commerce Herbert Hoover wanted to meddle — as he would 10 years later. But Harding resisted. No bailouts. No stimulus. No monetary policy. No fiscal policy. Harding had a better approach; he cut government spending and went out to play poker:

He said, "We will attempt intelligent and courageous deflation, and strike at government borrowing which enlarges the evil, and we will attack high cost of government with every energy and facility which attend capacity...it will be an example to stimulate thrift and economy in private life."

“Let us call...for a drive against extravagance and luxury, to a recommittal to simplicity of living, to that prudent and normal plan of life which is the health of the republic.”

Within a decade, Harding’s views sounded antiquated. But in 1921, he still saw the economic world as a moral world. This was not the result of long study or deep reflection on his part. He was probably the dummy everybody said he was. As Keynes pointed out, politicians are always in thrall of some dead economist. At least Harding was in thrall to the good ones.

“No statute enacted by man can repeal the laws of nature,” he announced. “Our most dangerous tendency is to expect too much of government...”

[totaldisbelief]

Isn't Economics more of an Art than a Science?

[yappnmutt]

no

[desertman]

It's akin to medicine, meteorology or climatology in that it is incredibly difficult to model and test. Therefore in a sense it is an art.

[hellboundtrain]

We think that Greed is perfect, and that with enough Greed in ourselves, our families, and immediate friends, that soon everyone else is at our beck and call, and just as we have stolen their futures and the dreams of their children we can then invite them over to have for dinner.

Sincerely,
The Banksters and Wall Street Friends and Politician Helpers

[desertman]

Not so much perfect but expected. Human beings acting as they are programmed.

[totaldisbelief]

Oh Goodie, the economists are going to change the VooDoo dolls they've been sticking pins into.

[Tom95134]

In other words, economists are finally having to admit that they really don't know what they are doing when they make all these predictions.

[desertman]

Goes without saying.

[S-]

Here's an idea - stop letting the 'invisible hand' pick our pocket then push us off a cliff.

[LisaMarieC]

Something that resembles musical chairs would be appropriate.

[ClarcKing]

Economists must review the times, writings of FDR and associates, his legislation, the Bretton-Woods Agreement, etc. Keynesism and Imperialism, in all of its disguises, must be repudiated.
The United States must terminate the usurious international monetary system.
Stop the bailouts, recover the bailout trillions, reconfigure the stimulus plan, since it is not stimulating.
Put the Fed into bankruptcy protection, get the trillions back, banks that qualify will join the U.S. National Bank. Credits and currency will be issued into the population's physical economy; with the executive of creating, improving, and expanding the necessary facilities that enhance human survival/our standard of living. Stop the foreclosures, market forces create homeless children, enact the Homeowners and Bank Protection Act. Healthcare can be achieved simply by expanding Social Security and Medicaid; re-enacting Hill-Burton Act, the general hospital system with the single payer feature. Stop the perpetual war policy, Afghanistan is a trap; benefiting the war vendors and financiers.
The citizenry must realize; the nation is conquered; under the oppression of an economic and population contraction policy, disguised as a dysfunctional government. Depopulati­on/culling the herd, lowering the standard of living are its' obvious objectives.
The world is depending on the United States to lead; confront the International Monetary Financier Power; cooperate with nations to reorganize the world financial/economic system.

[totaldisbelief]

you need historians for that too.
then take all the data and let science-fiction writers forecast the future.

[totaldisbelief]

so you want the Real Movers and Shakers (the powerful few at the top of the pile for whom all the other power-mongers work) to roll over and let the imaginary USofA make things ok?
the very most I can say about that is that it's wishful thinking...and I'm being as nice as I can be presently.

[mbondr1]

The headline should say, "Economists Forced To Think Of New Ways To Pander To The Rich." Yes, the old ways of pandering to their rich employers just don't work when people actually start losing money. New paradigms to justify their bad behavior must now be found.

[MrJoyboy]

Totally free markets means:

You're free of having a job.
You're free to live outdoors.
You're free of doctors.
You're free of overindulgence.
You;'re free of excess belongings.
You're free of monthly payments.
And you're free of worrying about the future.

[Sub Libertate Quietum]

2 things the ancient Hebrews did in order to have balance and fairness in their economy:

1.) The "Jubilee": Every 50 years ALL DEBT (including both rich and poor) was completely wiped. Erased. Eliminated.

2.) They didn't charge their own countrymen interest on loans.

Worked like a charm till the world got greedy...

[Crass Innuendo]

They never observed Jubilee. Their "prophets" reamed them for this regularly.

[totaldisbelief]

doesn't Islam say No Interest as well?