Is Economics Ready for a New Model?

Harvard Business Review

The conviction spread that, thanks in part to financial innovation, the world's developed economies had become more resilient even as financial markets became more volatile. You can find lots of scholars at top economics departments who study why bubbles and crashes happen, and how psychology and genetics shape individual decisionmaking. Disruptive innovation Economy FinanceEconomic theories based on rational behavior have been called into doubt by recent events.

Gene Sperling and Wall Street's Giant Sucking Sound

Harvard Business Review

A parallel that springs to mind is the deleterious impact that Western aid and development agencies have often had in Africa, at least in the past when they favored big-dollar projects. The increasing rewards to work in finance were for a long time defended as evidence that the financial sector was creating more value than the rest of the economy. Compensation Finance Government

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Longrunonomics vs. Shortrunonomics

Harvard Business Review

Real business cycle theory continued to prosper, developing an increasing stranglehold over the professional journals. Behavioral finance stayed on the margins. It doesn't offer much hope, though, for clear guidelines to macroeconomic decisionmaking. Something I wrote last week motivated Paul Krugman to riff : By 1988, it was already obvious that equilibrium business cycle theory had failed.