Economics lacks an anchored understanding of the nature of the reality that economics is supposed to illuminate. This column, which introduces a new CEPR Policy Insight, says that instability of leverage, connectivity, and the potential instability of the price level have all been neglected in stable-with-frictions macro theory. Technical innovations will not bring real progress as long as “stability-with-frictions” remains the ruling paradigm. Meanwhile, governments are not prepared to face another crisis.
Read this article from A. Leijonhufvud on Vox.eu here.
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