Posted by: Dirk | October 22, 2015

Economists on the financial crisis – two competing views

Sometimes a picture says more than a 1,000 words, but nowadays video is more appealing. Please watch the video below which shows Princeton University’s news conference for the Nobel Prize in economics winners Christopher Sims and Thomas Sargent that took place Oct. 10, 2011. Start with the question that is asked at 14 minutes and 10 seconds:

The competing view comes from Bill Mitchell, no Nobel prize and no significant claims to fame, unknown in the wider profession, presenting in front of students in Helsinki, Finland (watching the first couple of minutes should be enough to get an impression):

Of course, Mitchell addresses the crisis while Sargent and Sims did not (plan to). But nevertheless I would ask you: which type of economist would you prefer: the Nobel prize winners or the “worldly philosopher”? Choose your economists wisely!


Responses

  1. Sorry, I do not see any great difference in those few minutes. Mitchell is obviously a critic of the mainstream, which, I suppose, Sargent and Sims exemplify, but on the substantive questions that they address, they seem to be for the most part in agreement. First, they agree that fiscal policy is not unsustainable, that deficit mania is uncalled for. Second, they agree that the Euro zone is poorly structured, that for it succeed a unified fiscal mechanism is required.

    I happen to know that Mitchell is a strong critic of mainstream economics, but that is from other reading. I find the degree of agreement in those few minutes somewhat remarkable.

    • You are correct. However, the point is that RBC models have nithing to say on the euro zone’s problems. They als assume that fiscal policy does not work. I find it very interesting that Sargent and Sims don’t follow their own model when being asked a question regarding the real world.


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