9780195397918

How the Economy Works Confidence, Crashes and Self-Fulfilling Prophecies

by
  • ISBN13:

    9780195397918

  • ISBN10:

    0195397916

  • Format: Hardcover
  • Copyright: 2010-04-08
  • Publisher: Oxford University Press
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Summary

"Of all the economic bubbles that have been pricked," the editors of The Economist recently observed, "few have burst more spectacularly than the reputation of economics itself." Indeed, the financial crisis that crested in 2008 destroyed the credibility of the economic thinking that had guided policymakers for a generation. But what will take its place? In How the Economy Works, one of our leading economists provides a jargon-free exploration of the current crisis, offering a powerful argument for how economics must change to get us out of it. Roger E. A. Farmer traces the swings between classical and Keynesian economics since the early twentieth century, gracefully explaining the elements of both theories. During the Great Depression, Keynes challenged the longstanding idea that an economy was a self-correcting mechanism; but his school gave way to a resurgence of classical economics in the 1970s--a rise that ended with the current crisis. Rather than simply allowing the pendulum to swing back, Farmer writes, we must synthesize the two. From classical economics, he takes the idea that a sound theory must explain how individuals behave--how our collective choices shape the economy. From Keynesian economics, he adopts the principle that markets do not always work well, that capitalism needs some guidance. The goal, he writes, is to correct the excesses of a free-market economy without stifling entrepreneurship and instituting central planning. Recent events have shown that we cannot afford to treat economics as an ivory-tower abstraction. It has a direct impact on our lives by guiding regulators and policymakers as they make decisions with far-reaching practical consequences. Written in clear, accessible language, How the Economy Works makes an argument that no one should ignore.

Author Biography


Roger E. A. Farmer is Professor of Economics at UCLA. The author of six books and numerous journal articles, he is a contributor to the Financial Times Economists' Forum and a research associate of the National Bureau of Economic Research. In recognition of his work, he received the 2000 University of Helsinki medal.

Table of Contents

Preface
Introduction
Classical Economics
Keynes and the World Economy
Where the Keynesians Lost Their Way
The Rational Expectations Revolution
How Central Banks Impact Your Life
Why Unemployment Persists
Why the Stock Market Matters to You
Will There be Another Great Depression?
Will Monetary and Fiscal Policy Work?
How to Solve a Financial Crisis
Glossary
Notes
Table of Contents provided by Publisher. All Rights Reserved.

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