Three Rules for These Times
Most economists agree that the worst of this financial meltdown is now behind us. Unemployment is at a 25-year high, it's true, but at least the pace of lay-offs has slowed. If there was a doubt before, it seems safe to conclude that we're going to make it through this mess. There will be enormous social costs. People have lost their livelihoods and their life savings. Seniors have seen their retirement nest eggs disappear; young people have seen their employment hopes vanish. But we're going to make it.
The question is, what, if anything will we learn from this disaster? Already economists are subjecting their field to a long overdo critical review. In their thoughtful book, "Animal Spirits," George Akerlof and Robert Shiller, suggest that economics has left out the human factor--the emotional components that drive economic behavior. Alan Greenspan has publicly acknowledged that his mental model of the economy clearly did not match reality. It seems clear that we'll soon see new regulations put in place, new oversight and legislation designed to change the way the public sector referees the behavior of the private sector in economic matters.
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