From the New York Times:
With the 2008 financial crisis and Great Recession still a raw and painful memory, many economists are asking themselves whether they need the kind of fundamental shift in thinking that occurred during and after the Depression of the 1930s. “We have entered a brave new world,” Olivier Blanchard, the International Monetary Fund’s chief economist, said at a conference in 2011. “The economic crisis has put into question many of our beliefs. We have to accept the intellectual challenge.”
If the economics profession takes on the challenge of reworking the mainstream models that famously failed to predict the crisis, it might well turn to one of the few economists who saw it coming, Wynne Godley of the Levy Economics Institute. Mr. Godley, unfortunately, died at 83 in 2010, perhaps too soon to bask in the credit many feel he deserves.But his influence has begun to spread. Martin Wolf, the eminent columnist for The Financial Times, and Jan Hatzius, chief economist of global investment research at Goldman Sachs, borrow from his approach. Several groups of economists in North America and Europe — some supported by the Institute for New Economic Thinking established by the financier and philanthropist George Soros after the crisis — are building on his models.In a 2011 study, Dirk J. Bezemer, of Groningen University in the Netherlands, found a dozen experts who warned publicly about a broad economic threat, explained how debt would drive it, and specified a time frame.Most, like Nouriel Roubini of New York University, issued warnings in informal notes. But Mr. Godley “was the most scientific in the sense of having a formal model,” Dr. Bezemer said....MUCH MORE
...So what do the Godley models predict now? A recent Levy Institute analysis expresses concern not about serious financial imbalances, at least in the United States, but weak global demand. “The main difficulty,” they wrote, “has been in convincing economic leaders of the nature of the main problem: insufficient aggregate demand.” So far, they are not having much success.
HT: Counterparties
Previously:
Previously:
One of the heavyweights.Professor Wynne Godley: The Man Who Foresaw the Euromess Twenty Years Ago
From The Times:
As Professor of Applied Economics at Cambridge, a civil servant in the Treasury and later as one of the Treasury’s panel of “six wise men”, Wynne Godley was the most insightful macroeconomic forecaster of his generation. He made major, though as yet not fully recognised, contributions to macroeconomic theory....
The Genius of Wynne Godley: "Maastricht and All That"
"New Blog On Monetary Economics by Wynne Godley student "
...One more bit of self-referential (reverential?) linkage. In last year's post on what I called Izabella Kaminska's "The Theory of Everything" I mentioned en passant the guy who convinced Godley to hang his hat at Cambridge:
...In our next installment we'll look at “Kaldor’s stylized facts”(Cambridge economist Nicholas, Baron Kaldor ) to judge whether the facts were just opinions or still hold true, how they influence the #Occupy folks and why I couldn't take #Occupy as seriously as many did and ended up with posts such as "Octopi Wall Street" and "Ossify Wall Street: Russell Simmons/Kanye West; Richard Trumka, Tim Robbins Swing By" along with the trilogy...Kaldor's Stylized Facts are at the heart of the question of whether the current economy can provide employment for millions of people who are on the verge of being made irrelevant in economic terms.
What was old is new again.*
*Importantly for folks who muck about with commodities, Kaldor also coined the term convenience yield and developed Working's thoughts into The Theory of Storage.
