Economics Gets Sucked Into Dark Corners
Olivier Blanchard, the International Monetary Fund's chief economist and a leading inventor of modern macroeconomic theory, is known as one of the field's gentler critics. In 2008 he wrote a famously ill-timed paper declaring that "The state of macro is good." The biggest financial crisis since the Great Depression followed soon after. In that paper, Blanchard presented New Keynesian models -- which he had a big hand in developing -- as the dominant approach; at the same time, two prominent macroeconomists at the Federal Reserve Bank of Minneapolis were releasing a paper declaring those models "not yet useful for policy analysis!"
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