Sunday, March 8, 2009

Links of the Day

Esther Duflo says we can't trust bankers:

"There is another argument, implicit or explicit, for the nationalisation of banks; we can not trust bankers not to leave with the cash, let alone spend any assistance whatsoever in the general interest. Two recent studies that analyse the experience of recent years show that they will not hesitate to enrich themselves at the expense of the public good if they have the opportunity."

Willem Buiter offers a stinging critique of modern macroeconomics:

"In both the New Classical and New Keynesian approaches to monetary theory (and to aggregative macroeconomics in general), the strongest version of the efficient markets hypothesis (EMH) was maintained. This is the hypothesis that asset prices aggregate and fully reflect all relevant fundamental information, and thus provide the proper signals for resource allocation. Even during the seventies, eighties, nineties and noughties before 2007, the manifest failure of the EMH in many key asset markets was obvious to virtually all those whose cognitive abilities had not been warped by a modern Anglo-American Ph.D. education."

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