A Shift in the (Macro)Economic Paradigm

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role for government as the only solution to the current economic mess; indeed, Krugman’s New York Times op-eds now run the risk of flogging a dead horse, having constantly made the same point for a while now. Given that a lot of the stimulus arguments have concerned the quantitative aspect, a successful response would ideally revolve around the qualitative benefits/lack thereof of a stimulus package. Gary Becker and Kevin Murphy, two of the smartest economist out there in my view (certainly two of the best that Chicago has to offer), have provided some arguments to the contrary, most succinctly ( êðàòêî è ÿñíî - çà ñòèë ) in this Wall Street Journal piece from February. Kevin Murphy makes the same point in his characteristically lucid way here as well. Given the gargantuan deficit already confronting the US Government (over $1 trillion and rising at last count), the jury seems to be out on the practicality of Krugman’s particular brand of a Keynesian renaissance.
However, ...

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detailed analyses are available at The Baseline Scenario. Academics like Yale’s Robert Shiller now appear remarkably prescient êîéòî ïðåäâèæäà, äàëíîâèäåí for their wariness regarding EMH even in this decade’s glory years; it would not be a far stretch to argue that the EMH has been the biggest theoretical casualty of the financial crisis. Perhaps associated most closely with Eugene Fama, professor at Chicago’s Booth School of Business, the Efficient Markets idea that the market price is right appears patently î÷åâèäíî absurd and difficult to back-up given recent events. However, a more nuanced study of EMH and its applications would beg a tempering ñìåê÷àâàì of the criticism (see this ...

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