The state of modern economics

Paul Krugman has a nice write-up in the NYT about the state of modern economics, and the rifts that have appeared in the field since the onset of the recent financial crisis. Since using his very well-written textbook for my introductory macroeconomics class at Dartmouth, I’ve had a profound respect for Krugman as an economist, and here he identifies a lot of what I came to realize was complete bullshit (as much social “science” tends to be) about much classical economic theory — something that I’m mystified anyone can still subscribe to after even a casual examination of its underlying assumptions of perfectly rational actors:

When it comes to the all-too-human problem of recessions and depressions, economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly. The vision that emerges as the profession rethinks its foundations may not be all that clear; it certainly won’t be neat; but we can hope that it will have the virtue of being at least partly right.

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