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Il Dipartimento di Politica Economica, Finanza e Sviluppo  (DEPFID) termina la sua attività il 31 ottobre 2012

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4/2010

 DEPFID Working Paper  4 / 2010 - Abstract

Economy and economics: the twin crises

Alessandro Vercelli

This paper explores the interaction between the Great recession triggered by the US subprime mortgages crisis and the twin crisis of macroeconomics. We argue that a major determinant of the subprime crisis and its dire consequences has been an approach to economics that is unable to deal with irregular phenomena. On the other hand, the unexpectedly deep financial crisis that has heavily affected the real economy makes clear that we need a major redirection of macroeconomic theory to make it able to explain, forecast and control irregular phenomena.

  The recent interaction between the crisis of the economy and the crisis of macroeconomics is analyzed in the light of similar preceding episodes in the 20th century: the Great contraction of the 1930s and the Great stagflation of the 1970s.

  

Keywords: subprime crisis, Great recession, Great stagflation, Great contraction, Great depression, liberalism, laissez-faire, Keynesism, neoliberalism, new classical economics, theory and facts, scientific revolutions

 

JEL Classification: A11, B22, B41, E02, E 32, E 58, E 63, G01, G 20, N1

 

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Dipartimento di Politica Economica, Finanza e Sviluppo – Università di Siena