The long standing macro-economic model that has been the mainstay of training in the 20th century, the Keynesian model, predicts current events in our economy. Yet everyone tries to hold onto the long repudiated "supply-side" model that took hold of politics in the 80s. The result is that we are headed for deflation, and if the Republicans get there way a new Great Depression, with a "D".
Brother, Can You Paradigm? - NYTimes.com: "Brother, Can You Paradigm?A few months back one of my original mentors in economics — someone who got his graduate training in the pre-fresh-water era — asked me whether there was anything about the current crisis that required fundamentally new analysis. We agreed that there wasn’t."
Image via WikipediaThis is one of the untold tales of the mess we’re in. Contrary to what you may have heard, there’s very little that’s baffling about our problems — at least not if you knew basic, old-fashioned macroeconomics. In fact, someone who learned economics from the original 1948 edition of Samuelson’s textbook would feel pretty much at home in today’s world. If economists seem totally at sea, it’s because they have carefully unlearned the old wisdom. If policy has failed, it’s because policy makers chose not to believe their own models.
