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Animal Spirits

"(...) the business cycle is connected to fluctuations in personal commitment to principles of good behavior, and to fluctuations in predatory activity, which in turn is related to changes in opportunities for such activity."

in Akerlof, G.A. and Shiller, R., 2009. Animal Spirits: 38.

Vibram Five Fingers

30 km de corrida pelo Pinhal da Apostiça, na véspera de Natal: puro êxtase!

Correr com os Vibram é durinho e requer alguma habituação, mas não há dúvida que ficamos "agarrados". Sente-se o chão e a sensação é óptima. Já para não falar na massagem revigorante na planta dos pés. Com o aumentar da distância os pés e os gémeos sofrem um bocado, mas em compensação os joelhos e os tornozelos beneficiam muito com a melhoria da postura. Ainda não estou capaz de me aguentar muito tempo em cima da parte anterior dos pés e a tendência é para voltar à posição preguiçosa em cima dos calcanhares, mas com o treino isto vai lá. Recomendo vivamente! Mas atenção: com cuidado e moderação.

BOOK

25th Lisbon Marathon

STEVE REDGRAVE & MATHEW PINSENT OLYMPICS 2000 SYDNEY ROWING

A NATO aprovou hoje, em Lisboa, o processo de transição no Afeganistão e iniciou uma nova relação com Moscovo.

A NATO aprovou hoje, em Lisboa o processo de transição no Afeganistão e iniciou uma nova relação com Moscovo, numa cimeira que, segundo José Sócrates, marca a passagem da organização para uma era de cooperação.

"Um período difícil de tensão está passado", proclamou o Presidente russo, Dmitri Medvedev, que não colocou completamente de parte uma futura adesão russa à NATO. O seu homólogo norte-americano, Barack Obama, salientou que a NATO sai reforçada de Lisboa e com capacidade para enfrentar os desafios de segurança no século XXI: "Viemos a Lisboa com uma tarefa chave, que era revitalizar a nossa Aliança para estar ao nível dos desafios dos nossos tempos. Foi isso que fizemos".

Anders Fogh Rasmussen, secretário-geral da NATO, e o Presidente afegão, Hamid Karzai, assinaram em Lisboa um acordo que formaliza o processo de transição no Afeganistão, entre 2011 e 2014, que culminará com a entrega total da responsabilidade pela segurança do país aos próprios afegãos. Mas o secretário-geral da ONU, Ban Ki-moon, advertiu que o processo deve desenrolar-se com base "em realidades e não em calendários", defendendo que "não há atalhos para a paz".

Quanto à coopação entre a Aliança e a Rússia, Rasmussen disse que se estenderá ao nível da defesa antimíssil e considerou que Lisboa "foi um verdadeiro ponto de viragem", onde as duas partes ajudaram a "enterrar os fantasmas do passado", numa alusão à Guerra Fria.

O primeiro-ministro espanhol, José Luís Rodríguez Zapatero, resumiu os dois dias de trabalho: "Assistir a esta cimeira, ouvir os EUA, a Rússia, a Alemanha, a Polónia a trabalhar na mesma direcção, a cooperar nos grande assuntos da segurança colectiva internacional, representa um acontecimento histórico".

Os líderes da NATO também aprovaram um plano de redução dos efectivos da estrutura da organização e adiaram a decisão sobre o "mapa geográfico" dos quartéis até Junho de 2011. A esse propósito, José Sócrates manifestou "total confiança de que Portugal manterá um comando da NATO".

A cimeira decorreu sob fortes medidas de segurança e sem violência nas ruas, ao contrário do ocorrido noutras cidades em anos anteriores, apesar de dezenas de milhares de pessoas se terem manifestado em Lisboa para protestar contra a NATO.

20 Novembro 2010 | 21:02
Lusa

Team Hoyt

Is it the shoes? It's gotta be the shoes.

Barefoot Running: Forefoot Strike in Slow Motion

Barefoot Running: Forefoot Strike in Slow Motion from Runblogger on Vimeo.

A nave dos loucos

Animado com as sondagens o PSD anda a pedir ideias avulsas a alguns génios locais. A ideia é, em si mesma, péssima. A experiência mostra que existe muita gente para "dar" ideias, mas é raro surgir alguma que realmente se aproveite.

Em campanha, políticos e partidos, recorrem com frequência a este sistema. Dá imagens na televisão, mas a eficácia é nula. Fica-se com uma montanha de propostas banais à mistura com algumas francamente delirantes. Mas pior. Aqueles que oferecem ideias, que tomam invariavelmente por excecionais, ficam à espera da sua concretização. Como isso raramente sucede, de generosos rapidamente passam a ressabiados.

Esta semana o PSD foi vítima do exercício. Chamou três sumidades a uma sala com a palavra Alternativa. A coisa oscilou entre a sitcom e o susto.

Villaverde Cabral sugeriu que o PSD apresente o mais depressa possível uma moção de censura. Com o objetivo de deitar abaixo o governo e marcar eleições? Não. A genial ideia seria obrigar o Bloco a salvar o PS. Ficou por se perceber o que ganharia o PSD com isso, já para não falar do país.

Ernâni Lopes propôs cortar os salários da administração pública em 20 ou mesmo 30%. "A cru, sem explicar nada". Para além do peculiar entendimento de democracia, em coerência também não explicou qual seria o efeito de uma tal medida na economia e no consumo. Nem referiu o que fazer com a agitação social que inevitavelmente sucederia. Tropa nas ruas? A cru?

Mas a proposta mais caricata veio de Campos e Cunha que se tornou conhecido porque esteve quatro meses no governo, quatro. Como única medida digna de registo dessa vertiginosa passagem, deixou uma carta de demissão. Agora propõe que os votos em branco contem para a eleição de deputados imateriais. Ou seja, na assembleia passariam a existir alguns lugares vazios representativos do niilismo nacional. Ficou por explicar qual seria o sentido de voto desses deputados transparentes. Abstenção ou voto contra? E numa moção de censura não devia ser a favor?

No final da alucinada sessão os deputados do PSD estavam de boca aberta e alguns bastante preocupados. Queriam semear ideias, colheram tempestades. Terão pensado que foi azar na escolha. Calhou-lhes três extravagantes mentais. Mas é bom que se preparem. Não vai ser fácil encontrar gente sensata na legião de catastrofistas que hoje saltita de canal em canal de televisão.

Nestes últimos anos Portugal encheu-se de exaltados de toda a espécie. Formam um pequeno mas ruidoso exército de enfurecidos. Desdobram-se em escritos e declarações, tendo por base uma técnica linear: desvalorizar tudo o que é positivo e sobrevalorizar o negativo. A oposição (qualquer que ela seja) gosta. É bom para a propaganda. Só que é muito mau para a discussão objetiva. Quando a má-língua e o irracionalismo se sobrepõem aos factos e aos argumentos fundamentados não há debate que resista.

Ainda recentemente um economista afirmou que Portugal está hoje pior do que há cinquenta anos atrás, porque nessa altura tinha ouro no banco e agora tem dívidas. Esqueceu-se da miséria, do atraso e do país medieval de então. Mas claro isso são ninharias. Medina Carreira, a mais apreciada pitonisa da desgraça da atualidade, afirmou que a justiça no tempo de Salazar era melhor do que a de hoje. Sorte dele, e sobretudo dos muitos portugueses que felizmente não sabem nada sobre os tribunais plenários ou da falta de liberdade.

Mas não é só o disparate que anda à solta. A estupidez também vai fazendo o seu caminho. Ainda esta semana foram várias as vozes que se manifestaram contra o aumento de vagas no ensino superior. Com o sublime argumento de que existe muito desemprego. Ou seja, a ignorância seria mais competitiva. Não é.

Existe em Portugal muita gente, que independentemente das suas posições políticas, é competente e objetiva. Mas o ambiente não está propício para a seriedade. Os media e os partidos da oposição preferem os loucos. Compreende-se. Dão mais espetáculo.

Leonel Moura
in Jornal de Negócios, 16 Julho2010

Serra da Freita - Ultra trail 2010

UltraRunning Coaching Endurance

O triunfo da corrupção

"Um estudo de Luís de Sousa, sociólogo do ICS, mostra que 63% dos portugueses toleram (ou, mais precisamente, aprovam) a corrupção, desde que ela produza "efeitos benéficos" para a generalidade da população. Isto não é um sentimento transitório, provocado por trapalhadas recentes; é uma cultura. A cultura dessa grande guerra que desde que nasceu qualquer de nós tem com o Estado opressor e remoto e com Governos que nunca respondem pelo que fazem ou deixam de fazer. O português médio execra a autoridade, seja sob que forma for, e vive no seu país como se vivesse sob ocupação estrangeira. O servilismo e a falta de carácter, que tanta gente pelos tempos fora lamentou, escondem a vontade de salvar a pele e a aspiração, muito natural, de enganar quem manda.

Não há regras para ninguém, porque ninguém cumpre as que por acaso há. Quem pode levar a sério uma escola em que o próprio ministério fabrica os resultados, proíbe legalmente a reprovação e aceita a violência ? Quem pode levar a sério um regime que se diz democrático e selecciona o funcionalismo pela fidelidade partidária ? Quem pode considerar um ponto de honra pagar impostos, quando a fraude e a injustiça fiscal são socialmente sinais de privilégio e de esperteza ? Quem vai pedir um recibo ao canalizador ou ao electricista ou a factura no restaurante, quando sabe o que paga e o que o Estado gasta sem utilidade e sem sentido ? E quem vai obedecer às determinações da câmara do seu sítio, quando a camara é uma agência de negócios de favor e uma bolsa de favores sem explicação e sem desculpa ?

Não admira que o "povo dos pequenos" conspire constantemente contra a lei e até contra a decência. Que falte ao trabalho ao menor pretexto; que trabalhe mal, se trabalhar bem lhe custa; que peça aqui ou empurre ali, para se beneficiar ou aliviar; que torne as ruas uma lixeira pública; que guie, na cidade ou na estrada, como se estivesse sozinho; que minta a torto e a direito sobre o que lhe apetece e lhe convém; que não passe, enfim, de um miserável cidadão, indiferente à política e ao país. Não lhe ensinaram outra coisa. Os chefes são como ele. O Estado é como ele. Como exigir que ele se porte como Portugal inteiro não se porta ? Claro que ele aprova a corrupção e consegue ver nela virtudes redentoras. Não é agora altura de mudar de costumes."

Vasco Pulido Valente, Público, 12 Março 2010.

Hal Hartley - Amateur (1994) trailer

Call Center - The Movie

Peter Donnelly shows how stats fool juries

Born Poor? Santa Fe economist Samuel Bowles says you better get used to it

Excerpt from "Born Poor?", published by Corey Pein in 02/03/2010 in Santa Fe Reporter:

Isn’t inequality merely the price of America being No. 1?

“That’s almost certainly false,” Bowles tells SFR. “Prior to about 20 years ago, most economists thought that inequality just greased the wheels of progress. Overwhelmingly now, people who study it empirically think that it’s sand in the wheels.”

Bowles can take some credit for that shift, but he hasn’t won the battle. Many economists don’t study things empirically—that is, by looking at things in the real, physical world. Instead, they stay safely within the land of theory.

Theoryland may be the only place the “equality-efficiency trade-off” really works. Just to prove it wrong, Bowles charts the concept on a whiteboard at SFI.

The vertical axis is economic output. The horizontal axis is equality. The curve shows the theoretical trade-off. “So we’re here”—point A, high on the curve—“and we want to go to point B because we’re egalitarian. And [the theory says] that’s kind of too bad because we’re going to suffer the loss of income,” he says.

Bowles draws another dot inside the curve—point C—symbolically destroying the clean, simple world represented by the model. “Basically, it assumes that the economy is already efficiently organized,” Bowles explains. “But most economies are at point C. They have both more inequality and less income than they could have because they’re inefficient.”

The other-worldly philosophers - Jul 16th 2009, From The Economist print edition

ROBERT LUCAS, one of the greatest macroeconomists of his generation, and his followers are “making ancient and basic analytical errors all over the place”. Harvard’s Robert Barro, another towering figure in the discipline, is “making truly boneheaded arguments”. The past 30 years of macroeconomics training at American and British universities were a “costly waste of time”.

To the uninitiated, economics has always been a dismal science. But all these attacks come from within the guild: from Brad DeLong of the University of California, Berkeley; Paul Krugman of Princeton and the New York Times; and Willem Buiter of the London School of Economics (LSE), respectively. The macroeconomic crisis of the past two years is also provoking a crisis of confidence in macroeconomics. In the last of his Lionel Robbins lectures at the LSE on June 10th, Mr Krugman feared that most macroeconomics of the past 30 years was “spectacularly useless at best, and positively harmful at worst”.

These internal critics argue that economists missed the origins of the crisis; failed to appreciate its worst symptoms; and cannot now agree about the cure. In other words, economists misread the economy on the way up, misread it on the way down and now mistake the right way out.

On the way up, macroeconomists were not wholly complacent. Many of them thought the housing bubble would pop or the dollar would fall. But they did not expect the financial system to break. Even after the seizure in interbank markets in August 2007, macroeconomists misread the danger. Most were quite sanguine about the prospect of Lehman Brothers going bust in September 2008.

Nor can economists now agree on the best way to resolve the crisis. They mostly overestimated the power of routine monetary policy (ie, central-bank purchases of government bills) to restore prosperity. Some now dismiss the power of fiscal policy (ie, government sales of its securities) to do the same. Others advocate it with passionate intensity.

Among the passionate are Mr DeLong and Mr Krugman. They turn for inspiration to Depression-era texts, especially the writings of John Maynard Keynes, and forgotten mavericks, such as Hyman Minsky. In the humanities this would count as routine scholarship. But to many high-tech economists it is a bit undignified. Real scientists, after all, do not leaf through Newton’s “Principia Mathematica” to solve contemporary problems in physics.

They accuse economists like Mr DeLong and Mr Krugman of falling back on antiquated Keynesian doctrines—as if nothing had been learned in the past 70 years. Messrs DeLong and Krugman, in turn, accuse economists like Mr Lucas of not falling back on Keynesian economics—as if everything had been forgotten over the past 70 years. For Mr Krugman, we are living through a “Dark Age of macroeconomics”, in which the wisdom of the ancients has been lost.

What was this wisdom, and how was it forgotten? The history of macroeconomics begins in intellectual struggle. Keynes wrote the “General Theory of Employment, Interest and Money”, which was published in 1936, in an “unnecessarily controversial tone”, according to some readers. But it was a controversy the author had waged in his own mind. He saw the book as a “struggle of escape from habitual modes of thought” he had inherited from his classical predecessors.

That classical mode of thought held that full employment would prevail, because supply created its own demand. In a classical economy, whatever people earn is either spent or saved; and whatever is saved is invested in capital projects. Nothing is hoarded, nothing lies idle.

Keynes appreciated the classical model’s elegance and consistency, virtues economists still crave. But that did not stop him demolishing it. In his scheme, investment was governed by the animal spirits of entrepreneurs, facing an imponderable future. The same uncertainty gave savers a reason to hoard their wealth in liquid assets, like money, rather than committing it to new capital projects. This liquidity-preference, as Keynes called it, governed the price of financial securities and hence the rate of interest. If animal spirits flagged or liquidity-preference surged, the pace of investment would falter, with no obvious market force to restore it. Demand would fall short of supply, leaving willing workers on the shelf. It fell to governments to revive demand, by cutting interest rates if possible or by public works if necessary.

The Keynesian task of “demand management” outlived the Depression, becoming a routine duty of governments. They were aided by economic advisers, who built working models of the economy, quantifying the key relationships. For almost three decades after the second world war these advisers seemed to know what they were doing, guided by an apparent trade-off between inflation and unemployment. But their credibility did not survive the oil-price shocks of the 1970s. These condemned Western economies to “stagflation”, a baffling combination of unemployment and inflation, which the Keynesian consensus grasped poorly and failed to prevent.

The Federal Reserve, led by Paul Volcker, eventually defeated American inflation in the early 1980s, albeit at a grievous cost to employment. But victory did not restore the intellectual peace. Macroeconomists split into two camps, drawing opposite lessons from the episode.

The purists, known as “freshwater” economists because of the lakeside universities where they happened to congregate, blamed stagflation on restless central bankers trying to do too much. They started from the classical assumption that markets cleared, leaving no unsold goods or unemployed workers. Efforts by policymakers to smooth the economy’s natural ups and downs did more harm than good.

America’s coastal universities housed most of the other lot, “saltwater” pragmatists. To them, the double-digit unemployment that accompanied Mr Volcker’s assault on inflation was proof enough that markets could malfunction. Wages might fail to adjust, and prices might stick. This grit in the economic machine justified some meddling by policymakers.

Mr Volcker’s recession bottomed out in 1982. Nothing like it was seen again until last year. In the intervening quarter-century of tranquillity, macroeconomics also recovered its composure. The opposing schools of thought converged. The freshwater economists accepted a saltier view of policymaking. Their opponents adopted a more freshwater style of modelmaking. You might call the new synthesis brackish macroeconomics.
Pinches of salt

Brackish macroeconomics flowed from universities into central banks. It underlay the doctrine of inflation-targeting embraced in New Zealand, Canada, Britain, Sweden and several emerging markets, such as Turkey. Ben Bernanke, chairman of the Fed since 2006, is a renowned contributor to brackish economics.

For about a decade before the crisis, macroeconomists once again appeared to know what they were doing. Their thinking was embodied in a new genre of working models of the economy, called “dynamic stochastic general equilibrium” (DSGE) models. These helped guide deliberations at several central banks.

Mr Buiter, who helped set interest rates at the Bank of England from 1997 to 2000, believes the latest academic theories had a profound influence there. He now thinks this influence was baleful. On his blog, Mr Buiter argues that a training in modern macroeconomics was a “severe handicap” at the onset of the financial crisis, when the central bank had to “switch gears” from preserving price stability to safeguarding financial stability.

Modern macroeconomists worried about the prices of goods and services, but neglected the prices of assets. This was partly because they had too much faith in financial markets. If asset prices reflect economic fundamentals, why not just model the fundamentals, ignoring the shadow they cast on Wall Street?

It was also because they had too little interest in the inner workings of the financial system. “Philosophically speaking,” writes Perry Mehrling of Barnard College, Columbia University, economists are “materialists” for whom “bags of wheat are more important than stacks of bonds.” Finance is a veil, obscuring what really matters. As a poet once said, “promises of payment/Are neither food nor raiment”.

In many macroeconomic models, therefore, insolvencies cannot occur. Financial intermediaries, like banks, often don’t exist. And whether firms finance themselves with equity or debt is a matter of indifference. The Bank of England’s DSGE model, for example, does not even try to incorporate financial middlemen, such as banks. “The model is not, therefore, directly useful for issues where financial intermediation is of first-order importance,” its designers admit. The present crisis is, unfortunately, one of those issues.

The bank’s modellers go on to say that they prefer to study finance with specialised models designed for that purpose. One of the most prominent was, in fact, pioneered by Mr Bernanke, with Mark Gertler of New York University. Unfortunately, models that include such financial-market complications “can be very difficult to handle,” according to Markus Brunnermeier of Princeton, who has handled more of these difficulties than most. Convenience, not conviction, often dictates the choices economists make.

Convenience, however, is addictive. Economists can become seduced by their models, fooling themselves that what the model leaves out does not matter. It is, for example, often convenient to assume that markets are “complete”—that a price exists today, for every good, at every date, in every contingency. In this world, you can always borrow as much as you want at the going rate, and you can always sell as much as you want at the going rate.

Before the crisis, many banks and shadow banks made similar assumptions. They believed they could always roll over their short-term debts or sell their mortgage-backed securities, if the need arose. The financial crisis made a mockery of both assumptions. Funds dried up, and markets thinned out. In his anatomy of the crisis Mr Brunnermeier shows how both of these constraints fed on each other, producing a “liquidity spiral”.

What followed was a furious dash for cash, as investment banks sold whatever they could, commercial banks hoarded reserves and firms drew on lines of credit. Keynes would have interpreted this as an extreme outbreak of liquidity-preference, says Paul Davidson, whose biography of the master has just been republished with a new afterword. But contemporary economics had all but forgotten the term.
Fiscal fisticuffs

The mainstream macroeconomics embodied in DSGE models was a poor guide to the origins of the financial crisis, and left its followers unprepared for the symptoms. Does it offer any insight into the best means of recovery?

In the first months of the crisis, macroeconomists reposed great faith in the powers of the Fed and other central banks. In the summer of 2007, a few weeks after the August liquidity crisis began, Frederic Mishkin, a distinguished academic economist and then a governor of the Fed, gave a reassuring talk at the Federal Reserve Bank of Kansas City’s annual symposium in Jackson Hole, Wyoming. He presented the results of simulations from the Fed’s FRB/US model. Even if house prices fell by a fifth in the next two years, the slump would knock only 0.25% off GDP, according to his benchmark model, and add only a tenth of a percentage point to the unemployment rate. The reason was that the Fed would respond “aggressively”, by which he meant a cut in the federal funds rate of just one percentage point. He concluded that the central bank had the tools to contain the damage at a “manageable level”.

Since his presentation, the Fed has cut its key rate by five percentage points to a mere 0-0.25%. Its conventional weapons have proved insufficient to the task. This has shaken economists’ faith in monetary policy. Unfortunately, they are also horribly divided about what comes next.

Mr Krugman and others advocate a bold fiscal expansion, borrowing their logic from Keynes and his contemporary, Richard Kahn. Kahn pointed out that a dollar spent on public works might generate more than a dollar of output if the spending circulated repeatedly through the economy, stimulating resources that might otherwise have lain idle.

Today’s economists disagree over the size of this multiplier. Mr Barro thinks the estimates of Barack Obama’s Council of Economic Advisors are absurdly large. Mr Lucas calls them “schlock economics”, contrived to justify Mr Obama’s projections for the budget deficit. But economists are not exactly drowning in research on this question. Mr Krugman calculates that of the 7,000 or so papers published by the National Bureau of Economic Research between 1985 and 2000, only five mentioned fiscal policy in their title or abstract.

Do these public spats damage macroeconomics? Greg Mankiw, of Harvard, recalls the angry exchanges in the 1980s between Robert Solow and Mr Lucas—both eminent economists who could not take each other seriously. This vitriol, he writes, attracted attention, much like a bar-room fist-fight. But he thinks it also dismayed younger scholars, who gave these macroeconomic disputes a wide berth.

By this account, the period of intellectual peace that followed in the 1990s should have been a golden age for macroeconomics. But the brackish consensus also seems to leave students cold. According to David Colander, who has twice surveyed the opinions of economists in the best American PhD programmes, macroeconomics is often the least popular class. “What did you learn in macro?” Mr Colander asked a group of Chicago students. “Did you do the dynamic stochastic general equilibrium model?” “We learned a lot of junk like that,” one replied.
It takes a model to beat a model

The benchmark macroeconomic model, though not junk, suffers from some obvious flaws, such as the assumption of complete markets or frictionless finance. Indeed, because these flaws are obvious, economists are well aware of them. Critics like Mr Buiter are not telling them anything new. Economists can and do depart from the benchmark. That, indeed, is how they get published. Thus a growing number of cutting-edge models incorporate one or two financial frictions. And economists like Mr Brunnermeier are trying to fit their small, “blackboard” models of the crisis into a larger macroeconomic frame.

But the benchmark still matters. It formalises economists’ gut instincts about where the best analytical cuts lie. It is the starting point to which the theorist returns after every ingenious excursion. Few economists really believe all its assumptions, but few would rather start anywhere else.

Unfortunately, it is these primitive models, rather than their sophisticated descendants, that often exert the most influence over the world of policy and practice. This is partly because these first principles endure long enough to find their way from academia into policymaking circles. As Keynes pointed out, the economists who most influence practical men of action are the defunct ones whose scribblings have had time to percolate from the seminar room to wider conversations.

These basic models are also influential because of their simplicity. Faced with the “blooming, buzzing confusion” of the real world, policymakers often fall back on the highest-order principles and the broadest presumptions. More specific, nuanced theories are often less versatile. They shed light on whatever they were designed to explain, but little beyond.

Would economists be better off starting from somewhere else? Some think so. They draw inspiration from neglected prophets, like Minsky, who recognised that the “real” economy was inseparable from the financial. Such prophets were neglected not for what they said, but for the way they said it. Today’s economists tend to be open-minded about content, but doctrinaire about form. They are more wedded to their techniques than to their theories. They will believe something when they can model it.

Mr Colander, therefore, thinks economics requires a revolution in technique. Instead of solving models “by hand”, using economists’ powers of deduction, he proposes simulating economies on the computer. In this line of research, the economist specifies simple rules of thumb by which agents interact with each other, and then lets the computer go to work, grinding out repeated simulations to reveal what kind of unforeseen patterns might emerge. If he is right, then macroeconomists, like zombie banks, must write off many of their past intellectual investments before they can make progress again.

Mr Krugman, by contrast, thinks reform is more likely to come from within. Keynes, he observes, was a “consummate insider”, who understood the theory he was demolishing precisely because he was once convinced by it. In the meantime, he says, macroeconomists should turn to patient empirical spadework, documenting crises past and present, in the hope that a fresh theory might later make sense of it all.

Macroeconomics began with Keynes, but the word did not appear in the journals until 1945, in an article by Jacob Marschak. He reviewed the profession’s growing understanding of the business cycle, making an analogy with other sciences. Seismology, for example, makes progress through better instruments, improved theories or more frequent earthquakes. In the case of economics, Marschak concluded, “the earthquakes did most of the job.”

Economists were deprived of earthquakes for a quarter of a century. The Great Moderation, as this period was called, was not conducive to great macroeconomics. Thanks to the seismic events of the past two years, the prestige of macroeconomists is low, but the potential of their subject is much greater. The furious rows that divide them are a blow to their credibility, but may prove to be a spur to creativity.

We are all media producers now

With so many people tweeting, posting, creating content, is there anybody listening?