It’s of course a great privilege for me to be here in this role and especially on the occasion of the 75th anniversary of the publication of the General Theory. Two years ago, as you may recall, our profession enjoyed a moment of ferment. Economists who had built their careers on inflation targeting, rational expectations, representative agents, the efficient markets hypothesis, dynamic stochastic general equilibrium models, the virtues of deregulation and privatization and the Great Moderation were forced by events momentarily to shut up. The fact that they had been absurdly, conspicuously and even in some cases admittedly wrong imposed even a little humility on a few. One senior American legal policy intellectual, a fellow traveler of the Chicago School, announced his conversion to Keynesianism as though it were news.
The apogee of this moment was the publication in the New York Times Sunday Magazine of Paul Krugman’s essay, How The Economists Got It So Wrong. And in it, I noticed, Krugman admitted, and I’ll quote, that:
" … a few economists challenged the assumption of rational behavior, questioned the belief that financial markets can be trusted and pointed to the long history of financial crises that had devastating economic consequences. But they were swimming against the tide, unable to make much headway against a pervasive and, in retrospect, foolish complacency."
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