Monday, September 14, 2009

Cochrane on the state of macro and finance

As was to be expected, Greg Mankiw didn't stop at posting Eichengreen's link (see my previous entry), but found a different and, from some angles, much better one, this one written by John Cochrane. Here is a link to his post, here is a link to Cochrane's essay (NB: it is an MS Word document, .doc format and all), and here is a link to Cochrane's news page, which includes the essay (and where he asks readers to link to as he may edit it and change its location).

Cochrane's article is simply beautiful. It reminded me why I went into econ to start with. For real. If you are interested in understanding where econ stands and have not been exposed to a doctorate in it, but are willing to spend the time trying to get some nuance (as opposed to Krugman's caricatures), read it.

It is much more detailed about the state of macro and finance than Eichengreen's, while lacking the healthy level of mea-culpa in the latter. I see it as follows: the state of econ, including macro and finance, is fine, thank you (Cochrane), but given incentives, some economists were not introspective enough and joined other agents who, given their incentives, contributed to the bubble and the current crisis.

Together, they are what the NYT should have published.

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