Reconstructing Economics in Light of the 2007-? Financial Crisis

Benjamin Morton Friedman

Scholarly Articles from Harvard University Department of Economics

Abstract: The lessons learned from the recent financial crisis should significantly reshape the economics profession's thinking, including, importantly, what we teach our students. Five such lessons are that we live in a monetary economy and therefore aggregate demand and policies that affect aggregate demand are determinants of real economic outcomes; that what actually matters for this purpose is not money but the volume, availability, and price of credit; that the fact that most lending is done by financial institutions matters as well; that the prices set in our financial markets do not always exhibit the “rationality†economists normally claim for them; and that both frictions and the uneven impact of economic events prevent us from adapting to disturbances in the way textbook economics suggests.

Date: 2011
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Published in Journal of Economic Education

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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:5241348

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