Tuesday, March 3, 2009

"It works in practice, but does it work in theory?"

Willem Buiter provides an explanation of the joke about economists:
What this shows, not for the first time, is that models of the economy that incorporate the [Efficient Markets Hypothesis] - and this includes the complete markets core of the New Classical and New Keynesian macroeconomics - are not models of decentralised market economies, but models of a centrally planned economy.