September 24, 2011

The Weekend Interview with Robert Lucas: Chicago Economics on Trial - WSJ.com

A good piece by Mr. Jenkins well worth reading. The notion of 'rational expectations' rings soundly for me as a possible explanation why the economy remains in the doldrums.
"Let's face it, the "Chicago School" of economics—the one with all the Nobel Prizes, the one associated with Milton Friedman, the one known for its t

rust of markets and skepticism about government—has taken a drubbing in certain quarters since the subprime crisis.

Sure, the critique depends on misinterpreting what the word "efficient" means, as in the "efficient markets hypothesis." Never mind. The Chicago school ought to be roaring back today on another of its great contributions, "rational expectations," which does so much to illuminate why government policy is failing to stimulate the economy back to life..."

'via Blog this'

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