Krugman on the Malaise of Modern Macro: Critique without Alternative

Abstract

The views of Paul Krugman on modern macro in terms of the global financial crisis representing a collective failure of an economics profession which had become complacent, believing that financial markets could not, in themselves, cause non-trivial recessions is discussed. Krugman is right to question the capability of economics developed under the auspices of the dominant neoclassical paradigm to predict business cycle events; however, a more constructive critique is required.