The failure of the new macroeconomic consensus: from non-ergodicity to the efficient markets hypothesis and back again Online publication date: Wed, 14-Jan-2015
by Nigel F.B. Allington, John S.L. McCombie, Maureen Pike
International Journal of Public Policy (IJPP), Vol. 7, No. 1/2/3, 2011
Abstract: The subprime crisis raised some fundamental questions about the usefulness of mainstream economics. This paper considers the shortcomings of the new neoclassical synthesis and the new macroeconomic consensus in analysing the causes and consequences of the crisis. It demonstrates that the major problem was the assumption that the future could be modelled in terms of Knightian risk (as in the rational expectations and efficient markets hypotheses). It is shown that the near collapse of the banking system in the advanced countries was due to a rapid increase in uncertainty. Suggestions are made for the future development of financial macroeconomics using the insights from behavioural economics.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Public Policy (IJPP):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com