More hope for the economics profession arrived in the foreward of this paper(.pdf) from the Post-Crash Economic Society (as spotted in this item at Zero Hedge) in which Andy Haldane, Executive Director for Financial Stability at the Bank of England, takes on the dismal science.
Unbridled competition, in the financial sector and elsewhere, was shown not to have served wider society well. Greed, taken to excess, was found to have been bad. The Invisible Hand could, if pushed too far, prove malign and malevolent, contributing to the biggest loss of global incomes and output since the 1930s. The pursuit of self-interest, by individual firms and by individuals within these firms, has left society poorer.
The crisis has also laid bare the latent inadequacies of economic models with unique stationary equilibria and rational expectations. These models have failed to make sense of the sorts of extreme macro-economic events, such as crises, recessions and depressions, which matter most to society. The expectations of agents, when push came to shove, proved to be anything but rational, instead driven by the fear of the herd or the unknown. The economy in crisis behaved more like slime descending a warehouse wall than Newton’s pendulum, its motion more organic than harmonic.
In this light, it is time to rethink some of the basic building blocks of economics.
I’ve not yet read the paper itself, but, if it’s anything like the forward, it should be great.