article thumbnail

Economics Nobel a Lagging Indicator

Harvard Business Review

In this case, the award has been given for work that shores up a fiction of economics—rational expectations theory—that is complicit in the financial crisis and has been renounced even by Alan Greenspan. As the WSJ notes, "a celebrated 1981 paper by Mr. Shiller struck an early blow against efficient markets hypothesis.

article thumbnail

The (Many) Things Macroeconomists Don't Know

Harvard Business Review

Another quote: " Rational expectations theory has brought macroeconomics a long way. Buuut "atomistic rational agents [the figures that populate DSGE models] don't capture behavior during a crisis." but there is a clear case to reexamine the assumptions."

Crisis 14