Must-Read: Dani Rodrik: When Economics Works and When it Doesn’t

Must-Read: I wonder: There is an awful lot of bad right-wing economics. There is much less bad left-wing economics. But if the left wing were stronger as a political movement–as strong as the right wing–would there be as much bad left- as right-wing economics. I suspect not, but that is merely a guess. But if it is a correct guess, the next question is: “Why?”

Mark Thoma sends us to Dani Rodrik: When Economics Works and When it Doesn’t: “If we take as our central model one under which the efficient markets hypothesis is correct…

…in the run-up to the financial crisis… the steady increase in house prices or the growth of the shadow banking system… wouldn’t have bothered you at all. You’d tell a story about how wonderful financial liberalisation and innovation are…. But if you took the same [set of] facts, and applied the kind of models that people who had been looking at sovereign debt crises in emerging markets had been developing… you’d get a very different kind of story. I wish we’d put greater weight on stories of the second kind rather than the first. We’d have been better off if we’d done so…