Answers on Europe’s Debt Crisis, Part 3 – Economix Blog – NYTimes.com


Economists play a role in policy much like that of systems designers. The economy after the turn of the millennium looked much more like what economists would recommend than did the economy of the 1950s. But a real systems designer, like an architect or a software developer, worries about stability first. Efficiency is a secondary priority. So they build in lots of redundancy and compartmentalization so that if one part of their creation gets in trouble, the whole enterprise will not be jeopardized.The sort of financial system we have now, where markets and financial firms are so tightly linked, is the opposite of what a good systems designer would recommend. There were economists who recognized some of these links but those ideas were ignored until recently. For instance, Hyman Minsky, who took some of his thinking from Keynes, had a theory of how periods of economic stability inevitably create instability, which was ignored until the financial crisis. There are other useful ideas and relevant theories; in fact, the economics profession is quite diverse once you get outside the orthodoxy. Hopefully some of those ideas will get the hearing they deserve in the wake of the crisis.

Answers on Europe’s Debt Crisis, Part 3 – Economix Blog – NYTimes.com

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